Real Example of Cash Dividend

Today, I received a notification from Citiseconline, my online stockbroker saying that the cash dividend declared by Security Bank will be credited in my account at the end of the day. Wunderbar!

Please take a look at the notification of the cash dividend I received from Citiseconline. I received around 1,000 pesos from SECB. Taxes already deducted.

December 6, 2011   Attention: RANDY XXXXX

 This is to inform you of your cash dividend entitlement with details as follows:  

Account No. : XXXXX

Stock Code : SECB

Cash Dividend (Php) : 1.00 / share

Ex-Date : November 3, 2011

No. of Shares Entitled to Cash Dividend : 1,080

Gross Amount (Php) : 1,080.00

Less Withholding Tax (Php) : 108.00

Net Amount (Php) : 972.00

Cash dividend is money paid to stockholders, normally out of the corporation's current earnings or accumulated profits. All dividends must be declared by the board of directors and are taxable as income to the recipients.

Before I received my cash dividends, there are four dates that a cash dividend must walk through. These are the declaration date, ex-date, record date and the payment date.

Let us take a look at the declaration of cash dividends by Security Bank last October 21, 2011 taken from www2.pse.com.ph.

Date : 10/21/2011

Content : Please be informed that we received the BSP approval of the regular semestral cash dividend of P0.50 per share and special cash dividend of P0.50 per share of Security Bank Corporation. The record date for SBC's P1.00 per share cash dividend is on November 9, 2011, while the payment date falls on December 6, 2011.

CASH DIVIDEND (REGULAR): CASH - P0.50 per share

EX-DATE - November 3, 2011

RECORD DATE - November 9, 2011

PAYMENT DATE - December 6, 2011

CASH DIVIDEND (SPECIAL): CASH - P0.50 per share

EX-DATE - November 3, 2011

RECORD DATE - November 9, 2011

PAYMENT DATE - December 6, 2011

1.     Declaration date – the date when the directors of the company announce that a dividend will be paid to stockholders. Also called the “announcement date”.  

a.     In our example above, the declaration date is October 21, 2011. Dito inaanunsyo na may dibindendong paparating sa mga investors.

2.     Ex Date – this is the cut-off date in which the sellers are still entitled with the dividends. 

a.     In our example above, the ex date is November 3, 2011.             Kung bibili ka ng SECB stocks sa Nov 3, 2011, hindi ka na kasali sa bibigyan ng cash dividends dahil nga ang cut-off ay Nov 3, 2011 o ang tinatawag na ex-date. Pero kung ikaw naman ang nagbenta ng stocks noong Nov 3, 2011, kasama ka pa rin sa listahan ng mga makakatangap ng dibidendo.

3.    Record Date – The date established by an issuer of a security for the purpose of determining the holders who are entitled to receive a dividend or distribution.

a.     In our example above, the record date is Nov 9,2011. Dito tinitingnan kung sino ang mga may hawak ng SECB stocks as of November 3, 2011 para malaman ng kumpanya kung sino ang mga dapat bayaran ng cash dividends.

4.    Payment Date - The date on which a declared stock dividend is scheduled to be paid.

a.    In our example above, the payment date is Dec 6, 2011. Dito sa araw na ito, babayaran ang cash dividends. Tulad ko, ngayong araw ako binayaran ng cash dividends dahil yun ang nakasaad sa kanilang cash dividends declaration.

Cash dividends are one form of generating income from the stock market as a stock investor. The other one is through capital appreciation. If you like to have a layman’s perspective on cash dividends and capital appreciation, I am recommending that you read How The Stock market Works!. In that article, I laid down the principles of cash dividend and capital appreciation in its simplest form.

Dividends are also important in picking stocks. The higher the dividend yield your chosen stock is, the better for you.