Are dividends paid while a deal is pending?
What it means and how to read it on a deal.
What it is
Whether the target may keep paying its regular dividends before the deal closes.
What the agreement allows
Between signing and closing, a merger agreement usually limits what the target may do. It also says which dividends the target may still pay.
Say Litware pays $0.50 a share each quarter, and Woodgrove agrees to buy it for $50.00. The agreement may let Litware keep paying $0.50 a quarter, or allow no dividends at all.
Each dividend the agreement allows still needs the target's board to declare it.
Why buyers limit them
A dividend moves cash out of the company before the buyer pays for it.
So agreements usually list the payouts the target may make. Other dividends usually need the buyer's consent, apart from the agreement's exceptions.
The usual forms
Agreements handle dividends in a few common ways, and one agreement can combine several:
- Regular dividends
- The target may keep paying its usual dividend, up to a stated amount and on its usual dates. Nordstrom's 2024 agreement allowed up to $0.19 a quarter.
- Only with consent
- The target may pay none, or only those listed, unless the buyer agrees. Activision's 2022 agreement allowed one regular dividend of up to $0.47 a share. In July 2023, with the deal still pending, Microsoft agreed to one more, of up to $0.99.
- A stub dividend
- A last part-dividend for part of the final dividend period. The agreement sets how it's worked out and whether it depends on closing. Nordstrom declared $0.1462 a share this way in May 2025.
- A special dividend
- A one-off payment. It may come on top of the price, like Nordstrom's $0.25, or be taken out of it.
A real example
Kroger agreed to buy Albertsons in October 2022, for $34.10 a share in cash.
The agreement let Albertsons pay special dividends of up to $4 billion in all before closing. The per-share amount came off the $34.10.
Albertsons set a special dividend of $6.85 a share, for holders of record on October 24, 2022.
A state lawsuit delayed the payment, first due on November 7, 2022. Albertsons began paying it in January 2023.
The merger never closed. A court blocked it, and Albertsons ended the agreement on December 10, 2024.
Holders kept the $6.85, but never received the rest of the cash price.
What it means for shareholders
Who receives a dividend depends on its record date and the market's trading rules. A holder who sells too early usually gives it up.
Dividends paid while the deal is pending are cash in hand, whether or not the deal closes. Some, like Albertsons', come off the amount paid at closing.
A stub dividend, or a special dividend tied to closing, is usually paid only if the deal closes. In a cash merger, the shares are cancelled at closing, so no new regular dividends follow. One already owed may still be paid after.
On Tracking Alpha
- Allowed
- It may keep paying regular dividends, often up to a stated amount.
- Not allowed
- It may not without the buyer's consent. Allowing only one more dividend, or only those a REIT needs to keep its status, counts as not allowed.
The tag Dividends allowed shows the first. The annualized spread adds the dividends on record before the expected close.
Easily confused with
- Record date
- The day that decides who can vote, or who receives a dividend, along with the trading rules.
- Consideration
- What the buyer pays for each share in the deal. A dividend is a payout by the target itself, sometimes paid just after closing.
Questions
Do you still get dividends when a company is being acquired?
It depends on the merger agreement. Some let the target keep paying its regular dividend up to a stated amount, and others allow none without the buyer's consent. Each one still needs the board to declare it.
Does a special dividend lower the merger price?
Sometimes. Kroger's agreement took Albertsons' $6.85 special dividend off its $34.10 cash price. Nordstrom's $0.25 special dividend came on top of its $24.25 price.
Do I get a dividend if the deal closes before the record date?
Not a regular one, in a cash merger: the shares are cancelled at closing. Some agreements allow a stub dividend for part of the last period, if the board declares it.
Sources
- Nordstrom, Definitive proxy statement on the merger, Form DEFM14A (April 10, 2025)
- Nordstrom, Form 8-K on the completion of the merger (May 20, 2025)
- Activision Blizzard, Agreement and Plan of Merger with Microsoft, exhibit 2.1 (January 2022)
- Activision Blizzard, Form 8-K on the letter agreement with Microsoft (July 19, 2023)
- Albertsons, Agreement and Plan of Merger with Kroger, Form 8-K exhibit 2.1 (October 2022)
- Albertsons Companies, Statement on the Washington Supreme Court's denial of review: company proceeding with payment of its special dividend, Form 8-K exhibit 99.1 (January 17, 2023)
- Albertsons, Form 8-K on the termination of the Kroger merger agreement (December 2024)
Tracking AlphaBy Jera Value · Reviewed
