Navigating platforms and dividend payments

Dividends are a vital part of many investors' incomes, particularly those in retirement. So understanding dividend payment processes and how your investment platform delivers them to you can help to establish when you will receive them.

There are four key dates relating to dividend payments: the declaration, record, ex-dividend and payment dates. The declaration date is when a company’s directors announce what size the dividend will be and the day it will be paid. The company has a legal responsibility to pay the dividend once it has been declared. The ex-dividend date is one day before the record date, and you must have bought shares before this date to be entitled to the dividend. Shares typically fall on this date to adjust for the dividend amount. The reason you have to buy shares at least one day before the ex-dividend date is because shares typically take two days to settle. 

The record date is when the company determines who is entitled to receive a dividend according to its shareholder register. Record dates are often on a Friday and ex-dividend dates on a Thursday, but the timescale will vary if a company pays special dividends or is an overseas company with a secondary listing on the London Stock Exchange (LSEG).

The payment date is when the dividend is paid into your investment account. The length of time between the declaration and the payment dates varies, but London Stock Exchange says that companies should aim to pay dividends within 30 business days of the record date. Often, the process between the declaration date and payment can take up to two months. Companies usually say what the payment dates are on their websites and in shareholder announcements.   

Dividends and platforms

Most investment platforms pay UK dividends into customers’ accounts on the same day as they receive them. Some platforms alert customers to payments. AJ Bell, for example, sends secure messages that automatically release an email alert, letting investors know when a dividend has gone into their account and cash statement. The cash statement can be downloaded if the customer wants to save a copy. 

Charles Stanley Direct doesn’t notify customers of each dividend receipt but its customers can track these via their statements page online – a similar set-up to interactive investor's. Charles Stanley Direct also issues a consolidated tax certificate detailing taxable dividends in the new tax year. Hargreaves Lansdown shows dividend details in customers' accounts under the ‘income’ tab, setting out how much income they’ve received by tax year or calendar year, and customers can download this information to a spreadsheet. 

The amount of information you can expect to find on your platform about upcoming dividends varies. AJ Bell, for example, keeps a log of ex-dividend dates on its investment page but doesn't notify customers when dividends are declared. Similarly, Charles Stanley Direct marks stocks as ex-dividend when this happens on customers' portfolio valuation pages. Clicking on such a stock takes you to a page where pay dates are displayed. interactive investor does not show upcoming dividends in customers' account pages but customers can see this information on the stock research pages. 

Newer trading apps provide less information on dividends. Freetrade, for example, only shows customers the dividend yield on stocks that have historically been paid to them as there is no guarantee of future payments. A Freetrade spokesperson says that the company “plan to add more about upcoming dividend payments in the future”.

A common complaint about platforms is that the dividends they display can be out of date. Someone wrote to me recently about Hargreaves Lansdown and said: “Some of the price/earnings ratios and historic dividend yields have been woefully out of date as a result of market conditions last year.”

This, Hargreaves says, was due to delays in its third-party data provider updating dividend announcements as they were slashed last year.  

While some platforms don’t allow the automatic reinvestment of dividends, others do for a fee that is lower than their standard dealing fee. See the costs sheet in our ISA guide to find out what these charges are. Hargreaves Lansdown customers can choose between three options for dividend payments: automatically reinvest the dividend; receive it in their bank account; or hold it in their investment account, and invest or withdraw it later. Some 38 per cent of Hargreaves Lansdown Isa and 23 per cent of general investment account customers opt for automatic reinvestment.

Customers who opt to automatically reinvest dividends should note that this may not happen as soon as they are received. Hargreaves, for example, says that this is done between the 11th and 21st of each month. 

Overseas dividends

If you receive dividends from overseas listed shares, you might receive them a couple of days after the payment date. This is because platforms often need to exchange the dividends into sterling, which generally takes one or two days. 

Alex Lambert, external relations manager at Hargreaves Lansdown, says that dividends from overseas shares and non-UK funds show in clients’ accounts “typically a few working days” after the dividend payment date. Overseas payments have also to go through the Crest settlement system before they are received by Hargreaves Lansdown, and non-sterling currency is then exchanged in bulk at the end of each working day, before the amount in pounds is paid to clients the following working day.

A spokesperson from Freetrade says that US dividends are received from its US custodian the day after the market pay date and paid to customers on the day of receipt. But dividends paid by some American Depositary Receipts of foreign securities and Canandian securities may not be received for two or three business days after the market pay date. Most platforms will not let you automatically reinvest dividends from overseas listed companies.

Given that platform foreign exchange charges generally range between 0.45 per cent and 1.5 per cent of the amount being transacted for currency conversion, this can erode your dividend take quite substantially. Platforms including IG and interactive investor let you hold foreign currencies in your account, which saves you having to pay two sets of currency conversion fees if you reinvest your dividend. But this does not apply to Isas. For example, if you receive dividends from international stocks held in an Isa on interactive investor you have to pay 1.5 per cent of the transaction amount to receive the dividend and a further 1.5 per cent of the transaction amount if you reinvest it. 

Dealing with transfers

If you are transferring from one platform to another and receive a dividend payment in the process, it is likely that you will receive your dividend payment after the transfer has been completed. If the transfer isn’t completed by the ex-dividend date, the dividend is paid to the provider you are leaving to pass on to your new provider. This is quite common and the platform you are leaving should do a sweep of your account before closing it and send on any remaining dividends.

“Almost always, holdings are transferred first and only then will any cash payment be made by the transferring platform,” says Rob Morgan, chief analyst at Charles Stanley Direct. “Any residual dividend payments that are received after this main transfer has been made will be forwarded to the new provider as a matter of course. In our case, our closures team will diarise the date the last dividend payment is due and make a single final payment of any residual amount thereafter.” 

A spokesperson for Freetrade says that some platforms set a minimum value for transferring residual dividends and if it’s below that amount the funds are paid out to the customer or put in an investment account in the customer’s name. With partial transfers – when a customer has transferred out only a portion of their holdings and kept their account open – the dividend is likely to remain with the provider to whom it was paid.