Ex-Dividend Date or Ex-Date In order to receive the next scheduled dividend, you must own the stock before this date. Record Date or Date of Record This is the date that you must be on the company's books as a shareholder of record to receive the dividend. Payment Date This is the scheduled date on which a company will pay a declared dividend to shareholders of record.
The date by which you must be on the company's books as a shareholder to receive the dividend. The date the dividend is paid to shareholders. Dividend Yield This is the percentage of return a company pays out annually in dividends relative to its share price. Fast Fact about Performance Dividends are one component of a stock's total return. Sellers and Ex-Dates If you are selling a stock with a dividend reinvestment plan DRIP in place, the ex-dividend date is important to consider.
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Popular Courses. Part Of. Introduction to Dividend Investing. How Dividends Work. Stocks Dividend Stocks. What Is an Ex-Dividend? Key Takeaways Ex-dividend is when a company's dividend allocations have been specified. The ex-dividend date of a stock is the day on which the stock begins trading without the subsequent dividend value.
Investors who purchased the stock before the ex-dividend date are entitled to the next dividend payment while those who purchased the stock on the ex-dividend date, or after, are not. Article Sources. Investopedia requires writers to use primary sources to support their work.
These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace. Record Date The record date is the last date in which shareholders are eligible to receive a dividend or distribution. In these cases, the ex-dividend date will be deferred until one business day after the dividend is paid.
Sometimes a company pays a dividend in the form of stock rather than cash. The stock dividend may be additional shares in the company or in a subsidiary being spun off. The procedures for stock dividends may be different from cash dividends. The ex-dividend date is set the first business day after the stock dividend is paid and is also after the record date. If you sell your stock before the ex-dividend date, you also are selling away your right to the stock dividend.
Your sale includes an obligation to deliver any shares acquired as a result of the dividend to the buyer of your shares, since the seller will receive an I. Thus, it is important to remember that the day you can sell your shares without being obligated to deliver the additional shares is not the first business day after the record date, but usually is the first business day after the stock dividend is paid.
Likewise, the desire to reap the benefit of the upcoming dividend often spurs interest in the stock ahead of the ex-dividend date, leading to short periods of outperformance.
In its simplest form, dividend capture can involve tracking those stocks that, for whatever reason, do not generally trade down by the expected amount on the ex-dividend date. A few words are in order about this strategy. First, because the stock is held for less than 61 days, the dividend is not eligible for the preferential tax treatment that qualified dividends get, though the capital loss on the stock trade offsets that to some extent.
Second, this analysis does not include trading costs or the time value of money. As some stocks do show a tendency to trade higher into the ex-dividend date, it can be possible to buy the shares ahead of time sometimes even plus days ahead, thereby triggering qualified dividend eligibility and reap outsized returns by selling the stock on or before the ex-dividend date.
Likewise, there are strategies involving options that take advantage of similar aberrations, but those are beyond the scope of this article. The key to successfully executing the Dividend Capture Strategy is to find stocks that recover quickly after committing to a dividend payment and timing it right in order to minimize the risk from holding the stock. Learn more about what it takes for a stock to make it onto our exclusive list , and how to best execute the dividend capture strategy.
To that end, it does seem to be the case that once people start widely discussing particular dividend capture stocks, those strategies seem to stop working. Likewise, dividend capture is not a risk-free or cost-free strategy. The commission charges to get in and get out apply whether you make money or not, and investors pursuing dividend capture often find that they must execute the strategy across multiple names to diversify the risk. That ties up capital, which carries its own not-always-obvious costs.
Last and not least, this strategy takes a lot of work. It takes lots of research to find suitable candidates, it takes an appetite for risk to pursue the strategy, and it takes discipline and attention to detail to successfully execute. Investors can narrow down their stock investment search by screening, comparing and analyzing the vast universe of dividend-paying stocks. Check out the complete list of our tools now.
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