Dividend due bill process | Robinhood

Dividend due bill process

In some cases, spinoffs and special dividends may have different rules than standard distributions when it comes to the ex-dividend date. Typically, you will qualify for the dividend if you are the record holder on the record date of the distribution. When an event carries a due bill, the ex-dividend date is after the record date, and any buys or sells placed after the record date are automatically tracked. The ex-dividend date becomes the day your total position is eligible for the event.

What happens?

Typically, an ex-dividend date will be after the record date and pay date in situations when a spinoff or special dividend is greater than 25% of the stock price.

What does this mean for you?

You’ll no longer be entitled to a distribution if you sell the stock after the record date, but before the ex-dividend date. In this case, the seller would be obligated to pay any received cash or shares to the buyer. This payout occurs automatically.

With electronic trading, the extra step of the seller owing the buyer money is no longer necessary. The party entitled to the dividend will receive the distribution directly.

This process is called Due bill tracking.

Due bill tracking

A due bill determines a stock seller's obligation to deliver a pending dividend or another form of payment to the buyer of the stock.

It can also be used in other types of events, such as the issuance of rights and warrants, and stock splits.

Exceptions to the due bill process

The due bill process doesn’t apply in all cases. As a general rule, if the special dividend or spinoff is greater than 25% of the stock price, due bill process applies.

Some foreign stocks and dividends don’t follow the rule and some domestic stocks can be granted an exclusion. This means that there are some cases where distributions are less than 25% of the stock will follow the due bill process.

If a particular security’s due bill process is made available, you can typically learn more by visiting the issuer’s Investor Relations website.

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Brokerage services are offered through Robinhood Financial LLC, (“RHF”) a registered broker-dealer (member SIPC) and clearing services through Robinhood Securities, LLC, (“RHS”) a registered broker dealer (member SIPC). Cryptocurrency services are offered through Robinhood Crypto, LLC (“RHC”) (NMLS ID: 1702840). The Robinhood Money spending account is offered through Robinhood Money, LLC (“RHY”) (NMLS ID: 1990968), a licensed money transmitter. Credit card products are offered by Robinhood Credit, Inc. (“RCT“) (NMLS ID: 1781911 and issued by Coastal Community Bank, Member FDIC, pursuant to a license from Visa U.S.A. Inc.

The Robinhood Cash Card is a prepaid card issued by Sutton Bank, Member FDIC, pursuant to a license from Mastercard® International Incorporated. RHF, RHY, RHC and RHS are affiliated entities and wholly owned subsidiaries of Robinhood Markets, Inc. RHF, RHY, RHC and RHS are not banks. Securities products offered by RHF are not FDIC insured and involve risk, including possible loss of principal. Cryptocurrencies held in RHC accounts are not covered by FDIC or SIPC protections and are not regulated by FINRA. RHY products are not subject to SIPC coverage but funds held in the Robinhood Money spending account and Robinhood Cash Card account may be eligible for FDIC pass-through insurance (review the Robinhood Cash Card Agreement and the Robinhood Spending Account Agreement).

Options trading entails significant risk and is not appropriate for all customers. Customers must read and understand the Characteristics and Risks of Standardized Options before engaging in any options trading strategies. Options transactions are often complex and may involve the potential of losing the entire investment in a relatively short period of time. Certain complex options strategies carry additional risk, including the potential for losses that may exceed the original investment amount.

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