CFA Level II Exam · Analysis of Dividends and Share Repurchases

Forms of Dividends and Dividend Payment Chronology

Updated 7 October 2026 · Fact-checked

Dividends come as cash, stock, property or liquidating payouts. Cash dividends reduce company assets; stock dividends and splits do not change total value, only the share count. Four dates matter: declaration, ex-dividend, record and payment. Buyers on or after the ex-date do not receive the dividend, and the price falls by about the dividend.

Understand Forms of Dividends and Dividend Payment Chronology

A dividend is a distribution of value from a company to its shareholders. The form matters because it changes what the company owns and what you own.

A regular cash dividend is paid at a steady schedule. A special (extra) cash dividend is a one-off, often after unusually strong earnings. Cash leaves the company, so assets and shareholders' equity fall by the amount paid. Retained earnings fall, and total market value of equity should fall by roughly the same amount.

A stock dividend gives shareholders extra shares, for example 5 new shares for every 100 held. A stock split does the same job more sharply, for example 2-for-1. In both cases the company pays out nothing. Total equity and the company's value are unchanged. The share count rises and the price per share falls in proportion. Your percentage ownership does not change. The accounting differs: a stock dividend moves an amount from retained earnings to paid-in capital, while a split leaves the balances unchanged and only changes par value per share. A reverse split cuts the share count and raises the price.

Other forms: a property dividend pays in assets other than cash, such as inventory or shares of another company. A liquidating dividend returns capital rather than profits, for example when a business is wound up or sold off in parts. It is not a sign of earnings strength.

The dividend chronology has four dates. On the declaration date the board approves the dividend and it becomes a liability. The ex-dividend date is the first day a buyer no longer gets the dividend. The record date is when the company checks its register to see who is owed it. The payment date is when cash is paid. The ex-date is set so that anyone buying before it is on the register by the record date. Under T+2 settlement, the ex-date is one business day before the record date. Under T+1 settlement in the US, the ex-date is set on the record date itself. In every case, buyers before the ex-date are on the register by the record date. Check which settlement cycle and dates the vignette gives.

Key formulas to remember

Post-split share count: New shares = old shares × split ratio (e.g. 3-for-2 → × 1.5); A 2-for-1 split doubles shares. A reverse split of 1-for-4 multiplies shares by 0.25.
Post-split price: New price = old price ÷ split ratio; Assumes no change in total market value. Market cap stays the same.
Stock dividend price: New price = old price ÷ (1 + stock dividend rate); A 10% stock dividend gives 1.10 shares for each old share, so price is divided by 1.10.
Ex-dividend price (simple): Ex-date price ≈ cum-dividend price − dividend per share; Ignores taxes. With taxes, the drop can be less than the full dividend.
Cash dividend effect on equity: Equity falls by total dividend = DPS × shares outstanding; Cash and equity both fall; no effect for stock dividends or splits on total equity.
Dividend date order: Declaration → Ex-dividend → Record → Payment; Under T+2 the ex-date is one business day before the record date. Under T+1 it is the same day as the record date. Date of payment is last.

How to solve Forms of Dividends and Dividend Payment Chronology questions

Use the same routine for any question on dividend forms or dates. Read the vignette for the dates, the settlement cycle and the share data before you calculate.

1Identify the form of the distribution: cash, stock dividend, split, property or liquidating.
2Decide whether value leaves the company. Cash, property and liquidating dividends do; stock dividends and splits do not.
3For stock dividends or splits, compute the new share count and the new price using the ratio. Total value stays the same.
4For cash dividends, subtract the dividend from the price on the ex-date and subtract total cash paid from equity and cash.
5For date questions, mark the four dates on a line. The ex-date is one business day before the record date under T+2 and the same day as the record date under T+1. Count business days using the settlement cycle given.
6Decide who gets the dividend: the buyer who bought before the ex-date, not on or after it.
7Check the answer against the logic: no value created by a split, and no shareholder worse off in ownership percentage.

Quickest way: Value-out test and date line

When to use it: Use when you have under two minutes and the question mixes dividend forms with dates.

Ask: does cash or an asset leave? If yes, value falls. If no, value is unchanged.
For a split or stock dividend, divide price by the ratio factor and multiply shares by it.
Draw four dots: declaration, ex, record, payment. Place the buyer's trade date on the line.
If the trade is on or after the ex-date, the buyer gets no dividend.
Eliminate options that say a split changes total equity or ownership percentage.

Common mistakes in Forms of Dividends and Dividend Payment Chronology

Saying a stock dividend or split creates value for shareholders.
More shares looks like more wealth.
Fix: Each share is worth proportionally less. Total value and your ownership percentage are unchanged.
Treating a stock dividend and a split as identical in accounting.
Economic effect is the same, so students stop there.
Fix: A stock dividend transfers an amount from retained earnings to paid-in capital. A split leaves balances unchanged and changes par value per share.
Giving the dividend to a buyer who purchased on the ex-dividend date.
Students link the right to the record date and forget the settlement lag.
Fix: A buyer on or after the ex-date does not receive it. Only buyers before the ex-date do.
Placing the ex-date after the record date.
Names suggest record comes first.
Fix: Remember the order: declaration, ex, record, payment. The ex-date is never after the record date. It is one business day before under T+2 and the same day under T+1, to allow for settlement.
Calling a liquidating dividend a normal sign of strength.
Any payout seems positive.
Fix: A liquidating dividend returns capital, not profits. It reduces the firm's asset base and may signal wind-down.
Dividing price by the stock dividend percentage instead of 1 plus the percentage.
Rushed arithmetic.
Fix: For a 20% stock dividend, divide by 1.20, not by 0.20.

Worked examples

Example 1

Vignette: Marlow Industries has 40 million shares at €60 each. It announces a 3-for-2 stock split. Separately, a peer, Kessen Corp, has 10 million shares at €50 and declares a 10% stock dividend. Q1: How many shares does Marlow have after the split, and what is the expected price? Q2: What is Kessen's expected price after the stock dividend?

Show the solution

Marlow split factor is 3 ÷ 2 = 1.5.
New shares = 40 million × 1.5 = 60 million.
New price = €60 ÷ 1.5 = €40. Check: 60 million × €40 = €2,400 million = 40 million × €60.
Kessen: 10% stock dividend means 1.10 new shares per old share.
New price = €50 ÷ 1.10 = €45.45 (rounded).

Answer: Marlow: 60 million shares at about €40. Kessen: about €45.45 per share.

Example 2

Vignette: Daro Ltd declares a cash dividend of $0.80 per share on Monday 3 March. Shares settle on a T+2 basis. The ex-dividend date is Wednesday 19 March, the record date is Thursday 20 March and the payment date is Friday 4 April. The share closed at $32.00 on 18 March. Daro has 25 million shares. Ignore taxes. Q1: An investor buys shares on 18 March. Does she receive the dividend? Q2: A second investor buys on 19 March. Does he receive it? Q3: What is the expected ex-date price and the cash paid in total?

Show the solution

Order the dates: declaration 3 March, ex 19 March, record 20 March, payment 4 April.
Under T+2, a trade on Tuesday 18 March settles on Thursday 20 March, which is the record date. The first investor is on the register by the record date and receives the dividend. The ex-date of 19 March is one business day before the record date, which is the T+2 pattern.
A trade on 19 March is on the ex-date and settles on Friday 21 March, after the record date. The second investor does not receive the dividend because buyers on or after the ex-date are excluded.
Expected ex-date price ≈ $32.00 − $0.80 = $31.20.
Total cash = $0.80 × 25 million = $20 million, paid on 4 April.

Answer: Q1: Yes. Q2: No. Q3: About $31.20 per share; total payout $20 million.

Exam tips

Vignettes often give the settlement cycle. Use it to place the ex-date relative to the record date rather than guessing.
Expect a table of before and after shares, price and equity. Check which items change: cash dividends change equity, splits do not.
Watch the wording: 'cum-dividend' means with the dividend, 'ex-dividend' means without it.
Questions on taxes may state that the price drop is less than the dividend. Do not apply the simple rule when told otherwise.
With no penalty for wrong answers, always pick an option. Eliminate any that say a split or stock dividend changes total firm value.

Forms of Dividends and Dividend Payment Chronology in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Forms of Dividends and Dividend Payment Chronology: frequently asked questions

What is the difference between a stock dividend and a stock split?

Both increase the share count and lower the price per share without changing total value. A stock dividend moves an amount from retained earnings to paid-in capital. A split leaves account balances unchanged and changes par value per share. Splits are usually larger in ratio.

Why does the share price drop on the ex-dividend date?

A buyer on that date no longer gets the dividend, so the share is worth less by about the dividend amount. Taxes and other effects can make the drop differ from the full dividend.

Which date decides who receives the dividend?

The record date is when the company checks its register, but the ex-dividend date is the one you act on. You must buy before the ex-date to be on the register by the record date. Under T+2 the ex-date is one business day before the record date. Under T+1 it is the same day as the record date.

What is a liquidating dividend?

It is a distribution that returns shareholders' capital instead of profits, often when a business is being wound down or sold in parts. It reduces the company's asset base and is not a sign of earnings power.