What are dividends?
Dividends are what you can get from a company as a reward for investing in it – if you hold its stocks, of course.
Suppose you buy a company’s stock or, in our case, open a buy position, which you can do in FBS Trader. Now you are likely entitled to a fraction of the company’s net profit, provided that the company has profit and chooses to reward its investors.
How do dividends work?
If a company chooses to pay dividends and you have a buy or sell order with this stock by the ex-dividend date, you will be affected. If you have a buy position, you will receive the dividend, but if you opened a sell position on the stock before the dividend date, your account will be charged.
In our Calendar, dividends are shown in the stock currency per share. For example, if you own 100 PepsiCo stocks and the dividend is 1.075, you will receive $107.5 ($1.075 for each stock you own). But you can receive this payment only if you had the stock by the ex-dividend date.
What is an ex-dividend date?
The ex-dividend date is crucial for investors who want to receive dividends. To be eligible for a dividend, you should have a buy position open before or on the ex-dividend date. If you close it before this date or open it after, you will not receive the dividend.
Even if you close the buy position after the ex-dividend date, you are still entitled to the next dividend payout – but just the upcoming one. If you have a sell position before the ex-dividend date, you will have to pay the dividend.
In what form are dividends paid?
Companies can choose different types of dividends. Among the most common ones are cash, stocks, and property.
Granted, the vast majority of companies paying dividends do so in the form of cash by sending shareholders a check or a direct bank deposit. The dividends you see in our Calendar are likely to be cash dividends.
Some companies choose to pay dividends in new stocks. It may be a temporary decision if they lack cash but still want to reward their investors. In this case, the dividend will be expressed in percentage points, so if you own 100 stocks of the company and the dividend is 3%, you will receive three additional stocks.
You may also get some type of property proportionate to your stocks, anything from art to the company's inventories. It is rare but beneficial since property has market value.
When and how often do companies pay dividends?
Most dividends are paid quarterly, meaning every three months, although some companies choose to pay monthly, semi-annually (every six months), or annually.
The board of directors decides when and how much to pay in dividends and makes a statement. The statement includes dividend size, ex-dividend date, and the payment date. The payment date can be anywhere between a few days to a month after the ex-dividend date.
How do I receive dividends?
- Open the FBS Dividend calendar. Set filters for the Calendar. The ‘date’ filter will show the ex-dividend date by which you need to be holding the stock. The ‘companies’ will allow you to choose which stocks to buy or see if the companies whose stock you already own will pay dividends soon.
- Download or open a trading platform of your choice and enter into your trading account
- Buy the stock
Open the position taking into account the dividend payout information from the Calendar. Make sure you do it before the ex-dividend date.
That’s it! After that, you will receive a dividend payout proportionate to your stock – more info will be available in our Calendar. But be careful with your sell positions since you could be charged the dividend amount.