What is a Distribution Date?

Malcolm Tatum

Sometimes referred to as a payment date, a distribution date is the specified date that an investor account is scheduled to be credited with some type of payment on an investment. Payments are often received either on the distribution date by electronic funds transfers, or shortly thereafter if the investor has chosen to receive the payment via check. The payment may have to do with some sort of mutual funds distribution, bond interest payments, or dividends that are earned on shares of stock held in the investor’s portfolio. Knowing the distribution date associated with each holding in the portfolio makes it easier for investors to identify when additional resources for investing will be available, and plan what to do with those payments once they are in hand.

Man climbing a rope
Man climbing a rope

With a distribution date, the process usually involves identifying a specific date that the payment will be issued. For example, the disbursement may be structured to take place annually on 30 June. In some cases, there may be more than a single distribution date identified for a calendar year, possibly establishing one date near the end of beginning of a quarter. Less common is the model of identifying a general day, such as the last Wednesday of a given month, as the distribution date for dividends or interest payments on an investment.

The process for determining the distribution date is often covered in the terms and conditions associated with the asset itself. This means that there are provisions within the terms of a bond issue that govern how a distribution date on interest payments is determined. In like manner, the contract that governs the sale of stock options will include information that helps the investor understand how earnings are accrued and when he or she can expect to be allocated dividends on the shares that are in the investor’s possession.

Many investors attempt to arrange the assets in their portfolios so that the distribution date for each asset falls at strategic times during the calendar year. For investors who rely on those payments as part of their usual operating income, this approach is particularly effective. At other times, investors may structure holdings so that payments are received just in time to invest them in some type of short-term venture that ultimately generates greater returns. A third advantage to this approach is that in the event some unforeseen financial emergency arises, there is the comfort of knowing that a dividend or interest payment is forthcoming, and that those funds can be used to at least partially deal with the emergency.

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