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What Is an Unpaid Dividend?
An unpaid dividend is a dividend that is due to be paid to shareholders but has not yet been distributed. Unpaid dividends exist because of timing differences between the record date–the time at which existing shareholders become eligible to receive the upcoming dividend–and the payment date–when the dividend is actually paid.
How Unpaid Dividends Work
To understand unpaid dividends, it is helpful to review the four key dates that are part of the dividend-payment process. The first is the declaration date, which is also known as the “announcement date”. This is the date when the company’s board of directors announces the upcoming dividend. This date is followed by the ex-dividend date, the date when new buyers of the stock will not be eligible for the upcoming dividend payment.The record date, also known as the “date of record”, is the next important date. In order to be entitled to the upcoming dividend, shareholders must be recorded on the company’s books by this date. Typically, the record date is two days after the ex-dividend date. Last, the payment date is the date when the dividend will be paid to shareholders of record. The record date generally occurs about one week after the ex-dividend date.
Between the declaration date and the payment date, a company will have unpaid dividends on its books. Once the payments are made, the unpaid dividends will be zeroed out accordingly.