Anatomy of a Dividend

There are two primary ways to make money when you invest in the Philippine stock market. First is when the price per share of a stock increases – let’s say you bought SM last December at 600/sh, its now 719 or almost 20% growth- and second is when the stock that you hold gives out dividend.

There was a post in one of the pages I manage which asks, ” Pano po ba yung dividend at eligible ba ako dun?” I often see this question posted on online forums and groups so I decided to explore this topic in some detail to help newbies on this subject.

To start with, let’s examine a recent cash dividend announcement from JFC:

Let’s now try to define some terms here:

Record Date – according to investopedia, Record date is the cut-off date established by a company in order to determine which shareholders are eligible to receive a dividend or distribution.
Ex-dividend date – according to InvestingAnswers, The ex-dividend date is the day on which all shares bought and sold no longer come attached with the right to receive the most recently declared dividend.
Payment Date – according to suredividend, The payment date is the date on which corporate cash is actually paid to shareholder as a dividend

This is how I interpret the announcement:

Entitled ako sa 1.00/sh na dividend as long as may hawak akong JFC sa closing BAGO mag April 18th (ex-dividend date). Matatanggap ko ang dividend payout ko sa aking broker account sa May 5th (Payment date)

A few related questions on this:

1. When can I sell JFC and still eligible for dividend?

Answer: you can sell partial or all JFC stock on May 5th (ex-dividend date) and still receive dividend on Payment date.

2. Today is April 18th, can I still buy JFC and receive dividend?

Answer: Yes, you can buy JFC but No, you are not eligible to receive dividend anymore. You should have bought JFC yesterday.

3. Today is May 5th (payment date) and I’m sure I have JFC before ex-dividend date closing. Where is my dividend?

Answer: Contact your broker as there are instances where there is a delay in payment. Your stock broker can verify this information for you. The stock market can be crazy sometimes you know.

Please note that public companies here in the Philippines is not required to give out dividends. Mature companies who doesnt need to reinvest as much and have stable recurring income normally rewards their investors via dividends.

In Philippine Stock Market, a number of companies have a good track record of giving out dividends like TEL, SCC, URC, SM, MWC to name a few.

So what is a dividend and how can I spot one?

Mint.com released an infographic explaining what dividend is and what to look for when they are announced: