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Ordinary, interim, final, special
Most larger UK companies pay an interim dividend part-way through the year and a final dividend after the full-year results, once shareholders have approved it. The two together are the ordinary dividend for that year.
A special dividend is extra. It often follows a disposal, a particularly strong year, or a decision to return surplus cash. It is a mistake to add a special dividend into your mental picture of "what this share pays me every year" unless the company has said the higher level is the new ordinary policy. Many screeners still do that, which is how a one-off payout becomes a tempting yield.
A scrip dividend offers shares instead of cash. If you take the shares, you usually are not receiving spendable income, and you may be diluted relative to holders who took cash and to the company's own cash position. Read the election deadline. Missing it often defaults you into one option or the other.
The four dates that matter
Every cash dividend walks through the same sequence. The names are dull and the order is the whole trick.
| Date | What changes for you |
|---|---|
| Declaration | The board announces the amount and the later dates. You do not need to hold the shares yet. |
| Ex-dividend | The first day the shares trade without the right to that dividend. Buy on this day and you do not receive it. Sell on this day and you still do, if you held them the day before. |
| Record | The company looks at the register. Because UK shares typically settle after the trade, the record date falls after the ex-dividend date. You do not aim at the record date when deciding whether to buy. |
| Payment | Cash arrives, often several weeks later, in the account your broker holds for you. The gap is normal. It is not a late payment. |
On the London Stock Exchange the ex-dividend date is often a Thursday, with the record date the next business day. That is a habit of the market, not a rule you should trust without the company's own announcement. Investment trusts, REITs and companies with a quarterly calendar will not match a simple "twice a year" mental model.
The price step is not a gift
On the ex-dividend date the share price typically opens lower by roughly the cash dividend, before the day's news moves it somewhere else. Buying the day before to "capture" the dividend and selling the day after is a trade around that step. Costs, the tax on the dividend if it sits outside an ISA, and whatever the share does for its own reasons can erase the idea. This is a description of market mechanics, not a strategy.
Cum-dividend means the shares still carry the upcoming payout. Ex-dividend means they do not. A price quoted cum-dividend and a price quoted ex-dividend are not quite the same object, which is why a yield taken from a stale page can be slightly off around these dates.
Currency, overseas shares, and reinvestment
Plenty of companies in the FTSE 100 declare dividends in US dollars or euros and convert to sterling for UK shareholders at a rate set near the payment. Your sterling income then moves with the exchange rate even when the declared dividend does not. That is a feature of the share, not a broker error.
Shares listed overseas can have tax withheld in the other country before the cash reaches you. For US shares, a W-8BEN on file with a UK broker is how individual investors commonly claim the treaty rate of withholding rather than a higher statutory rate. Any foreign tax is a separate question from UK dividend tax. Inside an ISA the UK tax is nil, but foreign withholding can still be taken at source because the foreign tax authority does not run the ISA system.
Dividend reinvestment, sometimes called a DRIP, uses the cash to buy more of the same shares. Some brokers support fractions, some leave a cash remainder, and some charge a dealing fee that is large relative to a small dividend. Reinvestment is a convenience. It is also a decision to put the money back into the same company on the day the cash arrives.
Accumulation units still count
Open-ended funds often offer income units, which pay the distribution out, and accumulation units, which keep it inside the fund. Outside an ISA or pension, an accumulation unit does not hide the distribution from tax. You can owe tax on a dividend you never saw as cash. The fund's report, not your bank statement, is the record.
Preference shares are a different contract: the dividend is usually fixed and ranks ahead of ordinary shareholders, and it can be missed without the legal consequences of missing interest on a bond. They are easy to confuse with ordinary shares because both sit in a dealing account. Read which one you hold before you compare its yield with an ordinary share.