What
about the dividend your newly purchased stock pays? That's another action your
order to buy sets in motion.
A corporation's transfer agent, typically
a bank, is responsible for keeping track of the corporation's
shareholders. It regularly updates its records to show a new owner,
whether the stock is held in your name or, more commonly, in street
name. If you hold stock in street name, the dividend is actually
paid to DTC, which disburses the dividends to its member firms,
and your firm credits your account or sends you a check.The corporation's
dividend disbursing agent (DDA), also a bank, uses the transfer
agent's records to know where to pay the dividend —
either to you directly or to your brokerage firm, which allocates
your portion to your account.
The transfer agent's records also ensure
that you'll receive all the documents the corporation sends
to its shareholders, from annual reports to proxy statements.
If your stock is in street name, these
documents are actually sent to your firm and then on to you.
