DIVIDEND BASICS

Dividends are payments a company makes to share profits with its stockholders. These payments are one of the ways investors earn an income from their investment without selling their stocks.

You may have already received dividends on your stocks but you might not be aware of the actual timeline that determines who qualifies for a dividend payment. Having an understanding of these dates will help you determine if and when a dividend will be paid to you.

When are dividends paid?
A company’s board of directors determines when and if it will pay a dividend. Companies that pay a dividend often do so quarterly, semi-annually or annually.

How do I know whether I qualify for dividends?
As a shareholder, you must own the stock on or subsequent to a particular date selected by the company’s board of directors in order to be eligible for the dividend payout.

There are four critical dates you need to be familiar with: the declaration date, the record date, the ex-dividend date and the payment date.

The Declaration date
This is the date that the company’s board of directors announce that they will be paying a dividend. At this time, information about the size of the dividend, the date of record and the payment date is also disclosed. The company is legally responsibility to pay the dividend once it has been declared

The Record date
This date is used to determine who is on the share register and therefore entitled to the dividend. The company sets the date of record after it has announced that it will pay a dividend. Since stocks do not “settle” on the day you buy them, you need to be a shareholder on the record date in order to receive the dividend.

The Ex-dividend date
The ex-dividend date represents the cut-off point for receiving the dividend. Thus, if you buy and sell stock on its ex-dividend date, you will not receive the present dividend payout. Typically, the ex-dividend date is one business day prior to the record date. Sometimes, stocks are said to be trading “ex-dividend,” which simply means that they are trading on that particular day without dividend eligibility.

To ensure you are a shareholder by the record date, you need to buy shares at least one day before the ex-dividend date. This is because the standard settlement for Jamaica equities is two working days.

The Payment Date
This is the date dividends will be paid to your account. The length of time between the initial record date and payment date varies, but most companies usually pay dividends within 30 business days of the record date. Companies will usually reveal details of the payment date on their website and in shareholder announcements.

For illustration purposes, let’s take the case of Company XYZ, which sets a record date of September 30th. On the Jamaica Stock Exchange, the ex-dividend date would be September 29th.If you bought shares on September 24th, the trade would settle two business days later on September 28th so you would be on the share register on the record date and would qualify for the dividend.

If you bought shares on September 30th, the trade would not settle until October 5th. You would therefore not be on the share register as at the record date and therefore would not qualify for the dividend.

Conversely, if you wish to sell a stock and still receive the dividend that has been declared, you need to sell on or after the ex-dividend date. If you sell earlier, you will lose your right to claim the dividend.

Most dividends will be credited to investors on the stated payment date, especially if they are Jamaican dollar denominated dividends. If you want your dividends to be paid to your bank account or to your brokerage account you can make this request to the Jamaica Central Securities Depository.

A stream of dividends, especially when reinvested to take advantage of the power of compounding, can help you to reach your financial goals faster and may assist in building great wealth over time.

If you need advice in building a diversified stock portfolio, FHC Investments Limited can guide you in achieving your financial goals. Feel free to give us a call today.

The following are the current Government of Jamaica bond prices as at October 08, 2021:

*All rates quoted are opening indicative levels in the international capital markets and are subject to change based on market conditions.

The Jamaican dollar depreciated by $1.41 relative to the US dollar week-over-week, moving from a selling rate of $147.54 on Friday, October 1st to $148.95 on Friday, October 08th. The closing BOJ weighted average selling rates are as follows:

The following are the average Treasury bill rates:

Jamaica Stock Market

Movement of the JSE Indices

This week’s Market activity resulted from trading in 112 stocks, of which 68 advanced, 38 declined and 6 traded firm. Market volume amounted 115,810,169 units valued at over J$5,908,680,678.88.

FHCIL’s STOCK PICKS

This information should not be relied upon by the reader as Research or investment advice. If you need advice in building a diversified stock portfolio, FHC Investments Limited can guide you in achieving your financial goals. Feel free to give us a call today.