Dividends have many dates associated with them, and some of them have multiple names. For example, the book closing date is also known as the date of record. However, if you don't know the meaning of all the dividend dates, it will be hard to understand the significance of any one of them.
Book Closing Date
The book closing date for a dividend is the day by which you must be registered as an owner of the stock to receive the dividend. On this day, a record is taken of all the owners of the company and how many shares they own so the company knows whom to pay the dividend to on the payment date. It typically takes two to three days to become registered as a shareholder of a company, so this is not the last day to buy the stock; that is the ex-dividend date.
The declaration date is the date the company's board of directors announces the company will pay a dividend to its shareholders. This is the day on which the dividend goes on the company's financial statements as a liability that must be paid. It's also when the board announces the book closing date.
The ex-dividend date is the day by which you must have purchased the stock to receive the dividend. The ex-dividend date is different from the book closing date because it takes two to three to be officially recognized as a shareholder. After this date, anyone who purchases the stock is not entitled to receive the dividend. Typically, the stock price will be decreased by the amount of the dividend after this date because a new investor would not receive the payment.
The payment date is the day on which you receive your dividend. The payment date is usually about three weeks after the book closing date. Dividends are typically paid in cash, but they also can be paid in stock or property. Currently, these dividends are taxed at a rate of 15 percent.
Dividend Reinvestment Plans
Share owners of certain companies can choose to have their dividends paid in part or in total in additional shares of the company rather than in cash. Sometimes, companies will encourage this by offering the shares at a reduced price--the company benefits because it can save cash by paying in shares and using the cash for other investments.