What is a Declaration Date?

KD Morgan
KD Morgan

A declaration date (or announcement date) is the actual date that the board of directors of a company announces their intention of a dividend payment. This is the day the company will officially owe the stockholders the dividend.

Businesswoman talking on a mobile phone
Businesswoman talking on a mobile phone

A dividend is a distribution of a portion of the profits of the company. It is paid to both common and preferred shareholders. Most companies that pay dividends pay them on a quarterly basis. This would mean that if your company had a $1 US dollar (USD) dividend, you would receive $.25 (USD) per share every three months.

A declaration date is announced for each stock dividend payment. Most dividends are paid in either cash or stock. In addition to regular dividends, special one-time dividends occur as a result of litigation wins, the sale or liquidation of a portion of the business or spin off businesses.

Bookkeeping will record the binding liability of the dividend payout as of the declaration date. This number will include the total amount of the dividend payment, the number of stockholders eligible and the payment date of issue.

The declaration date is also when the board of directors will indicate a “date of record” and a “payment date.” The date of record is the date that a stockholder must own the stock in order to qualify to receive the dividend payout. In other words if you purchased the stock after the date of record (or ex-dividend date), you would not be eligible for that particular dividend payout.

The payment date is the actual payout date for that particular dividend. It is usually a week or more after the date of record. This date can affect the price of the stock and many investors will factor in this date in timing the market.

Once the dividend payment is authorized, it is binding for the company. The third Friday of the intended month is the declaration date for all US stock options. If that date falls on a holiday, the declaration date will be on the third Thursday of that month.

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