When settling the issue of who receives a dividend or not, there are numerous dates for owning a dividend to properly receive a dividend. These names are not intuitive and it's important to keep them straight if you want to be sure to receive a payment. To quickly review, a dividend is a cash payment sent from the company to the shareholders. A company starts up in the first place to make a profit and they sometimes will pass on the profit to the holders of their stock. This most often occurs quarterly and is an additional way to add income for an investor.

When you place your order to buy a company's stock; your broker sends the trade to the stock exchange. When another trader or investor likes your trade of stock, your order is completed. At this point your broker will let you know that you are now the owner of the company's stock. However you do not actually own the shares yet in the eyes of the company. At the end of the day, all of the trades are calculated out on what shares were actually traded. This process requires a few days to finish.

Settlement Date: After you get your order filled it requires 3 days for your broker to get all of its paperwork completed to send to the stock exchange. It takes time for them to have their work done and to send it to the company that actually issues the stock that you are buying. Some companies do not manage their stock and so they have a broker manage the trading of shares. Don't forget that some companies can have billions of shares traded daily. Keeping it all straight and organized is no easy job. The settlement date is when the company knows that you own their stock. You are still able to sell your shares before the settlement date. The company will continue on and handle the additional shares later after the dividend has been handled.

Declaration Date: This one thankfully is simple. It's the date that the company announces to everyone the details and other dates involved with a dividend. You do not have to do anything with this date.

Record Date: This date is when you must be in their books for owning shares. On this date the company will review all their shareholders and credit them with a dividend payment.

Payment Date: This is the day that your broker account receives the dividend. It can take place before the markets open or after trading hours.

Ex-Dividend Date: This is the most important of the dates for those seeking a dividend payment. This date is 2 days before the Record Date. It's the cut-off date in which you have to purchase the stock through a broker. Simply put, if you buy shares 3 business days BEFORE this day you will get a dividend. Remember the 3 days is due to the delay with the settlement date.

Why do they make it so confusing? To start, companies can have hundreds of millions or more of shares bought and traded every day. They have to have a point in time to keep things straight. There are many different companies involved in the transaction of getting a stock from a company or other trader and into your account. Most importantly, a company wants to reward owners that stay with their company with a dividend and are less interested in giving money to a trader that will day trade their stock and only hold it long enough to get paid a dividend. This is known as a dividend capture strategy.

Here is an example to illustrate the process. On Sunday 4-19-09 a company called Fortunet (FNET) had a press release of a special $2.50 dividend and the stock. 4-19-09 is the declaration date. The record date was Friday, 4-24-09. The payment date was 5-4-09. The ex-dividend date is two days before the record date which placed it on Wednesday, 4-22-09. Because the settlement date has 3 days before ownership is recorded someone wanting the dividend would have had to place their purchase order of stock and get filled on Sunday 4-19-09. However the stock exchanges don't open on the weekends so it would have had to have been on the previous business day. Why would FNET announce on the weekend? Their stock was valued at about $2.50 at the time. They had a large pile of money and nothing to spend it on. Growth of the company was not an option what with the current economy. FNET's business is to make bingo and other gambling related machines. So they decided to pass out the money but didn't want traders to buy their stock exclusively for the dividend.

All the dividend dates can be unclear but I hope I've discussed them in enough detail to give you a basic understanding of them. There are many great investing books that go into greater length in covering dividend dates.