Question

O'Garro Inc. has paid a regular quarterly cash dividend of $0.70 per share for several years. The common stock is publicly traded. On February 21 of the current year, O'Garro’s board of directors declared the regular first-quarter dividend of $0.70 per share payable on March 30 to stockholders of record on March 15.

Required:
As a result of this dividend action, state what you would expect to happen to the market price of the common stock of O’Garro, Inc., on each of the following dates. Explain your answers.

a. February 21.
b. March 13.
c. March 15.
d. March 30.

Answer 1

A.) February 21st

For the first quarter, this date is the date of declaration. In earlier years, this same dividend is what is paid. The price of the stock would not be affected too much by this.

B. March 13th

This is a date for ex dividend. The price in the stock market could fall by the same amount of the dividend.

C. March 15th

This date is the record date. The price cannot be influenced given that any stock that is traded in public is usually affected by the date of the ex dividend.

D. March 30tg

This date is the payment date. Liability is paid only as dividends payable.