ABC Corporation has declared a dividend of $1 per share. The company has set the ex-dividend date as March 15, the record date as March 20, and the dividend payment date as March 25. What does the ex-dividend date signify?a.The date on which the dividend is paid to shareholders.b.The date on which shareholders must be on record to receive the dividend.c.The date on which the dividend announcement is made to the public.d.The date on which new investors can purchase shares and still be eligible to receive the dividend.
Question
ABC Corporation has declared a dividend of $1 per share. The company has set the ex-dividend date as March 15, the record date as March 20, and the dividend payment date as March 25. What does the ex-dividend date signify?a.The date on which the dividend is paid to shareholders.b.The date on which shareholders must be on record to receive the dividend.c.The date on which the dividend announcement is made to the public.d.The date on which new investors can purchase shares and still be eligible to receive the dividend.
Solution
The ex-dividend date signifies b. The date on which shareholders must be on record to receive the dividend.
Here's why: The ex-dividend date is the date after which any new shareholders are not entitled to receive the declared dividend. In other words, if you buy the shares on or after this date, you will not receive the dividend. The record date, which is March 20 in this case, is the date on which the company looks at its records to see who the shareholders of the company are. An investor must be listed as a holder of record to ensure the right of a dividend payout.
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