What Is a Dividend Declaration Date?

B

The date on which a statement is issued by a firm's directors declaring a dividend is known as the "Declaration Date."

The correct answer is B. Declaration Date.

The declaration date is the date on which a firm's directors officially announce and declare a dividend. During this announcement, the directors declare the dividend amount per share and set the dividend payment date. This date is significant because it marks the formal decision of the company's board of directors to distribute a dividend to the shareholders.

Let's briefly go over the other answer options to provide a complete understanding:

A. Ex-Dividend Date: The ex-dividend date is the date on or after which a buyer of a security, such as a stock, will not receive the upcoming dividend payment. If an investor purchases the stock on or after the ex-dividend date, they are not entitled to receive the dividend for that period. The ex-dividend date is typically set a few business days before the record date to account for the settlement period of stock transactions.

C. Payment Date: The payment date, also known as the distribution date, is the date on which the dividend is actually paid to the shareholders. It is the day when the company transfers the funds to the shareholders' accounts or sends out physical dividend checks. The payment date is determined by the company's board of directors and is usually a few weeks after the declaration date.

D. Dividend Date: The term "dividend date" is not commonly used in financial terminology. It might refer to the payment date or record date in some contexts, but it is not a widely recognized term in relation to dividend payments.

E. Holder-of-Record Date: The holder-of-record date, also known as the record date or the book closure date, is the date on which an investor must be registered as a shareholder of a company to receive the declared dividend. The company identifies the shareholders of record on this date and those individuals or entities will be eligible to receive the dividend. The holder-of-record date is typically a few days after the declaration date and before the ex-dividend date.

In summary, the declaration date is the specific date on which a company's directors formally announce and declare a dividend. It is an important step in the dividend distribution process and sets the stage for subsequent dates such as the ex-dividend date and payment date.