Unpaid Dividend: What It Is and How It Works

An unpaid dividend is a dividend that has been declared by a company but has not yet been distributed to shareholders. The gap exists because several important dates separate the announcement from the actual payment. During this interval the company records the amount as a liability (unpaid dividends) until the payment is made.

Key takeaways
* Unpaid dividends arise from timing differences between announcement and payment.
* Companies record declared but unpaid dividends as a liability until they pay shareholders.
* Knowing the key dividend dates (declaration, ex-dividend, record, payment) tells you whether you’ll receive a particular dividend.

The four key dividend dates
* Declaration date (announcement date): The company’s board announces the dividend amount and the planned record and payment dates. At this point the company recognizes a liability for the dividend.
* Ex-dividend date: The day on or after which new buyers of the stock are not entitled to the announced dividend. If you buy the stock on or after the ex-dividend date, you will not receive the upcoming dividend.
* Record date (date of record): The date the company uses to determine which shareholders are entitled to the dividend. To be listed as a shareholder of record, your trade must settle before this date.
* Payment date: The date the company distributes the dividend to shareholders of record and clears the unpaid-dividend liability.

Timing note: Because most markets use a trade settlement cycle (commonly T+2), the ex-dividend date is typically set two business days before the record date so that buyers who purchase before the ex-dividend date will settle in time to be on the record.

Example
XYZ Corporation declares a $1.50 per-share dividend on July 30. The company sets the ex-dividend date for August 6 and the record date for August 8 (two business days later). Shareholders who owned (or purchased and settled) shares before the ex-dividend date—i.e., on or before August 5—will be on the company’s books on the record date and will receive the dividend on the payment date. From the declaration until the payment, XYZ carries the $1.50 per share as an unpaid dividend liability; once payments are made, that liability is removed.

Why it matters to investors
Understanding these dates prevents confusion about entitlement to dividends and explains why a dividend can be “declared” but not yet received. It also clarifies short-term price behavior around ex-dividend dates, when a stock’s price typically adjusts to reflect the upcoming payout.