Issued (after the closing of the acquisition), so all outstanding Second record date is declared to be on a date after the new shares are
Regular quarterly dividend (one third, in this example). Of that date (the existing shares) qualify for the first portion of the In our example, the first record date is declared to be onĪ date before the new shares are issued, so all outstanding shares as Issued & outstanding shares as of that date qualify for the fullĭividend payment, the first record date must be before the new shares are issued while the second record date must be after the new shares are issued. (Separate payment dates are not necessary butĪre usually used.) Because the record date establishes that all Paying two separate dividends requires two record datesĪnd two ex-dates. Same class of stock), the first portion must be paid before the acquisition closes, and therefore before the new shares are issued. Shareholders a different dividend amount than another group (of the The existing shareholders then receive both portions of theĭividend while the new shareholders receive only the second portion.īut because it is illegal to pay one group of To the new shares would be unfair to the other shareholders, theĬompany then splits the dividend into two parts, the first portionīeing one third of the quarterly dividend amount and the second portionīeing two thirds of the quarterly dividend amount. That means the new shares will have been outstanding only two months of Month into the acquiring company's current quarterly dividend period.
Newly issued shares of common stock and the transaction will close one In this circumstance, how does a company legally do that?īy splitting the amount of the regular dividend into two portions, paying the first portion before the new shares are issued, then paying the second portion after the new shares are issued.įor example, say a company buys out another company with But there's a complication - as we already know,Īll outstanding shares of the same class of stock must be paid the same To beįair to the holders of the original shares, sometimes the acquiringĬompany will pay a prorated dividend on the new shares instead of theįull amount. The closing of the acquisition, which rarely, if ever, occurs on theįirst day of the acquiring company's next dividend period. Stock instead of cash, shareholders of the acquired company receive new When a company buys out another company with Sometimes prorated is when a company merges with or buys out anotherĬompany with stock. The second primary circumstance under which Sometimes a company's final dividend is handled in a similar manner, as we will see shortly. Based on aįull quarter, the dividend amounts to $0.29 per share ($1.16 annualized)." 16,Ģ011, the day that KMI closed its initial public offering. The initial dividend is prorated from Feb.
Quarter of $0.14 per share, payable on May 16, 2011, to shareholders of "The board of directors declared a prorated dividend for the first Traded before the first scheduled dividend payment.Īs an example, Kinder Morgan, for their first dividend as a public company, paid a prorated dividend asĪnnounced in their press release on April 20, 2011: Proportionately, according to how many days the company was publicly Rarely will a company go public on the first day of its dividend period, so the first regular dividend is paid That in the second circumstance the process is used twice instead ofīut occasionally, a company will go public with a regularly scheduledĭividend.
Is prorated and the process of paying a prorated dividend isĮssentially the same in both circumstances, the only difference being There are two primary circumstances under which a dividend
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