Cash dividend processing is the sequence of operational steps that brings a cash dividend from the company that declares it to the investors who hold its shares. It begins when the company announces the rate per share and the key dates. Custodians and brokers capture the announcement, identify the clients who hold the shares, and calculate each entitlement from the position held on the record date. Trades executed on or after the ex-dividend date settle without the right to the payment.
On the dividend payment date, the issuer's paying agent pays the depository, which credits its participants, and each intermediary credits its clients after deducting dividend withholding tax at the rate that applies to them. The custodian then reconciles cash received against cash expected. Common exceptions include trades that settle late around the record date, which give rise to market claims, positions out on loan, currency conversion, and incorrect tax rates that later require a reclaim.