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Dividend entitlement question...
Posted on 1/16/14 at 7:56 am
Posted on 1/16/14 at 7:56 am
Would a shareholder who purchased a stock before ex-dividen date, and who sells before the record date, still be entitled for the dividend?
For example:
Day 1- (Stock purchased)
Day 2- Ex-dividend date
Day 3- (Stock sold)
Day 4- Record Date
Day 20- Pay date
In this scenerio, the shareholder purchased before ex-div, but sold before being a shareholder on record. If I had to guess, I would say a shareholder would need to purchase before ex-div, and hold through the record date.
Please answer only if you are positive. I've had several different folks give me "informed" opinions.
TIA.
For example:
Day 1- (Stock purchased)
Day 2- Ex-dividend date
Day 3- (Stock sold)
Day 4- Record Date
Day 20- Pay date
In this scenerio, the shareholder purchased before ex-div, but sold before being a shareholder on record. If I had to guess, I would say a shareholder would need to purchase before ex-div, and hold through the record date.
Please answer only if you are positive. I've had several different folks give me "informed" opinions.
TIA.
3
Posted on 1/16/14 at 8:26 am to Cmlsu5618
Must own security on record date to be a owner of record to receive the dividend.
Posted on 1/16/14 at 8:42 am to CHSBears
Dividends don't matter much to me when I make trades because I am hardly a bolt in the machine, but they sure make a difference to some of my clients...
To expand, what if you sell your position on the record date?
To expand, what if you sell your position on the record date?
Posted on 1/16/14 at 9:03 am to Cmlsu5618
SEC page on this issue
Ex-dividend date is the key - whoever owns the stock at the end of the trading day before Ex-dividend gets the dividend - this is because the price of the stock is automatically adjusted downward on the ex-dividend date. Buying it on the ex-dividend date assumes the price has been adjusted downward. Record date is a legacy of paper trades where they were allowed up to 2 business days to record the transfer (and I guess they still are). If you sell on the days in between, it shouldn't matter - you should still get the dividend.
Ex-dividend date is the key - whoever owns the stock at the end of the trading day before Ex-dividend gets the dividend - this is because the price of the stock is automatically adjusted downward on the ex-dividend date. Buying it on the ex-dividend date assumes the price has been adjusted downward. Record date is a legacy of paper trades where they were allowed up to 2 business days to record the transfer (and I guess they still are). If you sell on the days in between, it shouldn't matter - you should still get the dividend.
This post was edited on 1/16/14 at 9:06 am
Posted on 1/16/14 at 10:38 am to Ace Midnight
Thanks Ace.
But see now I'm exactly where I started. I've gotten two answers to this question and both contradict each other
.
So what you are saying is that record date is not as important as it used to be, and that if you had purchased the day before ex-div, you are "grandfathered" in to the record?
But see now I'm exactly where I started. I've gotten two answers to this question and both contradict each other
. So what you are saying is that record date is not as important as it used to be, and that if you had purchased the day before ex-div, you are "grandfathered" in to the record?
Posted on 1/16/14 at 10:47 am to Cmlsu5618
you must hold to the closing of ex-div, after that, you may sell and still recieve the dividend. If you ever see a press release of a company that gives off a dividend, they tell you that you must hold it until given date to recieve.
Here is an example:
John Deere
Here is an example:
John Deere
Posted on 1/16/14 at 11:18 am to Cmlsu5618
quote:
So what you are saying is that record date is not as important as it used to be, and that if you had purchased the day before ex-div, you are "grandfathered" in to the record?
Well, maybe it was never important - it was just the planning they did - they announce the dividend "as of" a certain date. They backed off 2 business days to allow for recording - and if you buy on or after that ex-dividend date, you are not entitled to the dividend - therefore, if you buy on or before the day before the ex-dividend date (sorry - only way to use consistent language) - you ARE entitled to the dividend.
This is because dividends are paid directly out of the company's cash reserves and purchases of stock the day before the "ex-dividend" are deemed to be priced by the buyer and seller as including that dividend - and the price after is deemed as not including the "dividend" - so, although somwhat Byzantine, it is consistent with basic contract principles/meeting of the minds.
Bottom line - if you buy on or after the ex-divided, you are not entitled to the dividend. You do not have to hold it until the record or payment date - those are administrative concerns - the substantive "break" is at ex-dividend.
This post was edited on 1/16/14 at 11:20 am
Posted on 1/16/14 at 11:52 am to Cmlsu5618
T + 3, Trade date plus 3 business days to settle.
LINK
Going to your example:
Day 1 - purchase, T + 3 would mean on day four you would be owner of record.
Day 2 - Ex-dividend date, T + 3 would mean if purchased on the day you would be owner of record on day 5, no dividend. Would purchase without dividend.
Day 3 - sold, T + plus would settle on day 6, would be owner on record date(day 4)
LINK
Going to your example:
Day 1 - purchase, T + 3 would mean on day four you would be owner of record.
Day 2 - Ex-dividend date, T + 3 would mean if purchased on the day you would be owner of record on day 5, no dividend. Would purchase without dividend.
Day 3 - sold, T + plus would settle on day 6, would be owner on record date(day 4)
Posted on 1/16/14 at 1:19 pm to CHSBears
Perfect.
Thanks fellas.
Thanks fellas.
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