A special dividend is not similar to the normal dividend. A company pays special dividend to its shareholders apart from the regular dividend payment cycle. The distinction between these two types of dividends can be the consequence of a number of factors.
These factors include the following:
The issue date
The amount of dividend
The form of payment
In case of special dividends, the amount, which is declared, carries a special significance in association with the price of the stock. Due to this, the ex-dividend date is fixed at one share trading day subsequent to the payment date.
The buying or selling of the stock will be carried out on the basis of ex-distribution with adjustments made for the dividend amount, which has been paid one share trading day subsequent to the payment date.
A dividend is considered to be a special dividend if the amount of dividend is 20% or more in terms of the price of the security or stock. For receiving special dividend, it is necessary for an individual to register himself as a shareholder on the record date.
In order to become a shareholder on the record date, an individual has to buy the shares at least three share trading days before the record date.
For special dividends, the buying or selling of the share or stock goes on excluding the dividend from the date of record till the payment date. After that, it is adjusted for the amount of dividend, which has been paid and the buying and selling of that stock begins on the basis of ex-distribution at one share-trading day subsequent to the payment date. In order to become eligible for receiving the special dividend, it is necessary that the stock is held till the payment date.
If a stock is sold in the middle of the record date and the payment date, then the shareholder is not eligible for special dividend.