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💰 Dividend

A dividend is a cash distribution paid by a company (or fund) to its shareholders, representing a share of the company's profits.

📖 Definition

Dividends are periodic payments made from a company's earnings to its shareholders. They are typically paid quarterly (common in the US) or semi-annually/annually (common in Europe). ETFs also distribute dividends collected from their underlying holdings.

Key dates in the dividend lifecycle:

Date Meaning
Declaration date Board announces the dividend amount and dates
Ex-dividend date First trading day where buyers do NOT receive the dividend. The stock price typically drops by the dividend amount at market open.
Record date Company checks who owns shares (usually 1-2 days after ex-date)
Payment date Cash is deposited into shareholder accounts

📉 Impact on Market Price

On the ex-dividend date, the stock price theoretically drops by the exact dividend amount. This is because new buyers on that date will not receive the upcoming payment.

Example

Apple (AAPL) trades at $180.00. A $0.25 quarterly dividend goes ex-dividend.

  • Before ex-date close: $180.00
  • Ex-date open (theoretical): $179.75
  • Difference: −$0.25 (= dividend amount)

In practice, market forces may cause the actual opening price to differ, but the exchange adjusts the reference price down by exactly $0.25.

📊 Effect on Total Return

While the price drops by the dividend amount, the total return (price change + dividends received) remains neutral at the moment of payment. Over time, reinvested dividends compound significantly.

\[ \text{Total Return} = \frac{P_{\text{end}} - P_{\text{start}} + \sum D_i}{P_{\text{start}}} \]

Where \(D_i\) represents each dividend payment received during the holding period.

🔢 Dividend Yield

The dividend yield expresses the annual dividend as a percentage of the current stock price:

\[ \text{Dividend Yield} = \frac{\text{Annual Dividends per Share}}{\text{Current Price per Share}} \times 100\% \]

Typical ranges

  • Growth stocks: 0–1%
  • Mature companies: 2–4%
  • High-yield / REITs: 4–8%+

🧮 How LibreFolio Handles Dividends

In LibreFolio, a DIVIDEND event is recorded with:

  • Date: The ex-dividend date
  • Amount: The per-share cash payment
  • Currency: The currency of payment (e.g., USD, EUR)

For market-priced assets (Yahoo Finance, justETF), dividend events are informational — they explain the ex-date price gap but don't modify the fetched price. For Scheduled Investment assets, they are integral to the price model.