Final answer:
The dividend payment date is when cash and retained earnings are decreased in a company's finances, as it pays out a portion of its profits to shareholders based on the number of shares they own.
Step-by-step explanation:
The dividend payment date is a significant event in the calendar of a publicly-traded company, marking the day when the company distributes a portion of its profits to shareholders. On this date, two main accounting changes occur within the company’s financial statements:
- Cash is decreased because the company is paying out money to its shareholders.
- The Retained Earnings account is decreased, which reflects the payment of dividends, effectively reducing the amount of profits retained in the company for future use or reinvestment.
For instance, if a company like Coca-Cola offers a dividend of 75 cents a share, an individual owning 85 shares would receive a dividend of $63.75. Dividend-paying stocks are often held for their steady income stream, with investors choosing to retain these stocks in their portfolios for long durations, benefiting from the recurring distribution of profits.