What it’s for
Many companies listed on the Philippine Stock Exchange give out dividends to people who have their stocks or shares. This can be in one of two ways: either through more stocks or through cash.
How finance folk use it
The decision to give out dividends is always made by a company’s Board of Directors. This includes the amount, type, and frequency of the dividends.
When the decision is finalized, the company makes an announcement where they identify an ex-date and a payment date.
The ex-date is when the company finalizes the list of people who will get dividends. If you buy stock on or after the ex-date, you won’t be entitled to dividends. The payment date is when the dividends are distributed to the stockholders that held the stock before the ex-date.
Even if you have stocks by the payment date, you won’t be entitled to dividends if you didn’t have any before the ex-date. On the other hand, you don’t need to have the stocks on the actual payment date if you were already part of the ex-date.
What it means for you
With stocks, you normally make money through capital appreciation but you may also be able to profit through dividends. Just remember that the dividend payout rate varies.
If you really want consistent dividends, you can buy preferred shares, which are first in line for dividends. These stocks don’t change in value very often and are harder to get.