Unpaid Dividend

What Is an Unpaid Dividend?

An unpaid dividend is a dividend that is due to be paid to shareholders yet has not yet been distributed. Unpaid dividends exist in light of timing differences between the record date- the time at which existing shareholders become eligible to receive the forthcoming dividend-and the payment date- when the dividend is really paid.

How Unpaid Dividends Work

To comprehend unpaid dividends, it is useful to audit the four key dates that are part of the dividend-payment process. The first is the declaration date, which is otherwise called the "announcement date". This is the date when the company's board of directors reports the forthcoming dividend. This date is trailed by the ex-dividend date, the date when new purchasers of the stock won't be eligible for the impending dividend payment.

The record date, otherwise called the "date of record", is the next important date. To be qualified for the impending dividend, shareholders must be recorded on the company's books by this date. Ordinarily, the record date is two days after the ex-dividend date. Last, the payment date is the date when the dividend will be paid to shareholders of record. The record date generally happens around multi week after the ex-dividend date.

Between the declaration date and the payment date, a company will have unpaid dividends on its books. When the payments are made, the unpaid dividends will be focused out appropriately.

Example of an Unpaid Dividend

XYZ Corporation is a public corporation with a price of $30 per share. A significant number of its investors view XYZ as a stable income-delivering investment due to its steady history of dividend payments. Anxious to keep up with this reputation, XYZ's managers declare an impending dividend of $1.50 per share on July 30th. Its record date is set as Thursday, August eighth. The company's ex-dividend date is set for Tuesday, August sixth.

In this scenario, just shareholders who bought their shares on Monday, August fifth (or before that date) would be qualified for receive a dividend. The payable date can shift contingent upon the inclinations of the company, however it is consistently the last of the four dates. For the period of time between the announcement date on July 30th and the payment date, XYZ will have unpaid dividends on their books. Be that as it may, these will be dispensed with once the dividends are paid to shareholders.

Features

• During this time, a company will record any unpaid dividends on its books, yet this balance will be dispensed with once the dividends are paid.
• Investors genuinely should comprehend the key dates engaged with the dividend-payment process so they are not confounded about whether they will be qualified for a particular dividend payment.
• Unpaid dividends exist since there is a difference between when a company reports its dividend and when that dividend is paid.