The share market language about when dividends are distributed puzzlesbemuses many people. Here is how they all fit together.
The important dates are called the ex-dividend date; the record date or books closing date; and payable date or payment date.

The only two dates stock investors need to know about are the ex-dividend date and the payable date.

The record date is declared by the company when the dividend amount is announced.
Dividends are distributed to all shareholders listed on the company’s share register at the books close date.

The investor must have bought the shares at least three business days prior to the record date. This is due to T+3 settlement. The ASX uses the T+3 settlement system for settling trades. The instant the trade is executed the shareholder becomes the legal owner of the stock, and assumes the gains or losses from variations in its price.

But the actual day the trade is settled—when money is exchanged and the stock is transferred from seller to buyer—doesn’t occur until three trading days after the trade is executed.

Hence, to own the shares on the record date, and therefore receive the dividend, you need to have purchased it three trading days earlier.

Investors do not have to calculate the ex-dividend date from the books close date, the ASX does this for us, and ex-dividend dates are readily available online.

The ASX informs the market of the date investors need to have purchased by in order to be on the register at the books closing date.  

That ASX stipulated date is known as the ex-dividend date. If you buy a share before the ex-dividend date, the stock is cum-dividend, and you’re entitled to the dividend. If you buy it on or after the ex-dividend date, then you will not receive the current dividend and the stock is considered ex-dividend. That’s why it’s critical for portfolio managers to understand this particular date. 

On the ex-dividend date, the shares should fall in price by the value of the dividend. So it’s important not to panic because the share falls a few per cent overnight. You’ll be compensated by your dividend payment in a few weeks time. It is worth checking the payable date as some companies are serial offenders when it come to late payment of dividends. 

All things are usually not equal so a share will usually fall a little more or a little less than the dividend, depending on what is happenning in the market on that day. 

The payable date is the date on which the company posts out the dividend cheques to those eligible for them. Alternatively, for those using direct credit, the day the funds will be transferred to you. Investors who nominate in a dividend reinvestment plan (DRP) will receive shares in lieu of cash around this date.