Question

Keenan Corp declared a dividend of $1.10 per share on Friday February 9, payable on Friday March 2 to shareholders of record as of Tuesday February 27. Katie bought 1,000 shares of Keenan on Friday February 23 and Jake sold 500 shares on Thursday February 22.

a) Will Katie receive a dividend? If so, how much will she receive? Briefly explain.

b) Will Jake receive a dividend? If so, how much will he receive? Briefly explain.

Answer 1

Dividend declare date signifies that dividend once declared becomes the liability of the company.

Dividend record date signifies the date of record on which company decides which shareholders are entitled to a dividend payment as on the record date.

a) katie is entitled to a dividend payment of $1100 ( 1,000 shares*$1.10 per share) because she purchased the share on February 23 that is before the record date that is February 27 thus her name must be there in the shareholder's list and she will be entitled for a dividend payment.

b) jake is not entitled to a dividend payment because he sold his shares on February 22 that is before the record date that is February 27 thus his name must be removed from the shareholder's list and he will not be entitled for a dividend payment.