Dividends Uncovered

Investors have a number of incentives to invest their long-term savings in the hope of growing their wealth.

Among those is the prospect of dividend payments. This is the portion of earnings that a company distributes among its shareholders each year.

Whether you own shares in a company direct or via a fund you might be in receipt of a dividend one or more times a year.

How much an investor can expect to earn in dividends will depend on a few different factors, including how many shares you own, the company you’ve invested in, and how often they decide to pay dividends.

It’s important to note that these payments can fluctuate in response to changes in the company’s profits, or even broader market conditions if there are major changes in the company’s specific sector. It is at the discretion of the company whether they issue a dividend or not to shareholders – some companies choose not to pay dividends and instead reinvest their earnings back into the company.

Shareholder payments

Dividend payment dates vary from company to company and the exact timing of when you receive that money after the company declares its dividend depends on several factors.

The journey of a dividend

The journey starts with the company who will make an announcement that they intend to pay a dividend. This needs to be approved by company shareholders prior to going ahead.

To be eligible to receive a company dividend, shareholders must hold the stock at least one business day prior to the ex-dividend date. E.g. if the ex-dividend date is 1st July, anyone who buys shares in the company on or after that date would not be entitled to the dividend.

The company then proceeds to issue the dividend, this is typically around a month later (although it can vary) and is known as the payment date.

Operationally what happens on Smart Investor is that we receive a bulk payment which covers the amount due to all of our customers who own shares in the issuing company.

That payment might arrive on the dividend payment date, although it isn’t guaranteed and sometimes there is a delay. We cannot pay your dividend until the money arrives.

Upon receipt of the payment, we calculate your entitlement of the dividend and make payment to your Smart Investor account(s), including the way you would like to receive it based on your dividend preferences (which you can view/amend within Investment Settings). This could mean that you receive cash to your Investment Account or nominated bank account; OR you could have selected automatic dividend reinvestment to grow your holding. Please note that if you do this the amount of the received dividend will not be re-invested fully, we will however endeavour to purchase as many shares as we can and you will be left with a small surplus cash which will be placed in to your account.

Dividend payment not arrived yet?

We aim to pay dividends to holders as quickly as possible. However, delays can occur for a variety of reasons. We would ask for your patience and please to bear in mind that it can take up to 10 business days to fully process a dividend payment from receipt of the issuing company, completing the reconciliation process and distributing it to our Smart Investor customers who hold shares in the company.

Whilst we have up to 10 business days to pass on dividend income to you, which is derived from the Client Money rules that govern us; typically we achieve this for most dividends within 3 working days.

The following table illustrates the dividends we have received to date in as of 1st June 2023 and our achieved service level.

Asset type Total received YTD as of 1 June 2023 Paid same day Paid by next working day Paid within 2 working days Paid within 3 working days
UK Equities 1,404 43% 64% 74% 82%
Income distributions 2,404 92% 96% 98% 98%
International equities 487 27% 63% 75% 81%

On rare occasions a delay can occur if we receive the wrong amount from the company and need to return the payment and await the correct payment to be made.

You can check a company’s dividend dates on our research centre either on the stock fact sheet or the market diary.

It’s also worth bearing in mind that overseas dividend payments on international equities can take longer and so payments may arrive in your account a few working days after the dividend payment date.

If you still have any questions please contact us.

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