Ex-dividend date

The key date to remember for dividend paying stocks is the ex-dividend date

The key date to remember for dividend paying stocks is the ex-dividend date. The Record Date, or Date of Record determines the Ex-dividend date, when you must own the stock.

In order to receive the upcoming dividend payment pay-out you must already own or you must purchase the stock prior to the ex-dividend date.

It is important to know when you buy or sell stock, there is a three-day settlement period (three stock trading days) on all buy and sell orders.

Here is an example: The ex-dividend date is two stock business days prior to the record date. To be a stockholder on the Record Date you must purchase the stock before the ex-dividend date. The latest date you can buy the stock to be a stockholder on record and be entitled to the dividend would be one day prior to the ex-dividend date to allow for the three stock-trading-day settlement of the stock purchase. If you purchase the stock the day before the ex-dividend date you would be a stockholder on the record date and would be entitled to receive the dividend payment.

You must be a stockholder on the record date to receive the dividend payment.

You do not have to sell the stock after the record date to be entitled to the dividend. However, you must hold without selling your stock until the ex-dividend date or after to be entitled to the dividend payment. In this example, assuming that you purchased the stock one day before the ex-dividend date, you would be a stockholder on record date. If you sell the stock on the ex-dividend date, the buyer of your stock would be a stockholder one day after the record date given the three stock business trading day settlement. The person that bought your stock would not be entitled to receive the dividend.

You only have to own the stock one day to be entitled to receive the dividend payment.

If you buy prior to the ex-dividend date, you are buying in time to receive and be entitled to the upcoming dividend payment. Selling your stock on the ex-dividend date or after, means selling it without the dividend. The buyer of your stock will not receive the latest dividend payment pay-out, but would receive the next dividend pay-out if held until the next ex-dividend date.

Like any trading system, overall market sentiment and momentum are key. One advantage is that dividend paying stocks do have a tendency to be much more stable and predictable and have the tendency to appreciate in price due to the dividend payment.

Tax effects

There may be tax impacts if you are holding a stock or fund on the ex-dividend date. The dividend is paid out regardless of how long you held the stock or fund, and that may be taxable income to you.

External links

• Some helpful links to Ex-dividend.com which also explain Dividend Capture
• And Ex-dividend Date
• SEC page on Ex-Dividend Date
• NASD (Nasdaq) document on ex-dividend dates
• US, UK and Canadian Ex-Dividend Date Research Center