Hi guys, This is really basic stuff and it is something that you should really know if you're going to play the game. If you haven't already, one day you might find yourself making some very silly decisions without realising it. The principles are extremely simple so I will spell it out for your benefit and it will all make sense within a minute. There are 3 key dates attached to any dividend event: EX DATE- anyone who has bought the stock up until the day prior to this date (whether the trade settles or not) is entitled to the dividend attached to the share. If a stock has an ex div date of 14th April, if you buy on the 14th, you aren't entitled to the div. RECORD DATE- this is basically the date where the company registrars take a snapshot of their books and say "ok, whoever owns the stock according to what we see settled gets the dividend". As Don pointed out, this date is staggered after the Ex Date (apart from some European stocks but we wont go into that) so that trades have time to settle and simplify the distribution of money and save us all passing the dividend on to the rightful owners in the case of unsettled trades. If your trade has not settled, for whatever reason, dont panic because you WILL still receive it as it is your legal right. PAY DATE- Exactly what it claims to be i.e. the day the company distributes dividends to share owners. Again, as Don says, there are plenty of explicitly thought out methods of trying to make a sly and easy buck out of the whole dividend process so dont start thinking that you've unveiled a secret that few people know about. If you had an edge that obvious, do you think it would exist???? Lots of different ways big boys try to make that dividend really count, using stock borrowing methods and manufactured dividends (basically borrowing stock with special conditions atached to the trade) plus options and blah blah blah. Forget it, you can't suck extra profit out of a dividend event. HOWEVER, there certainly are ways to trade around this event and potentially profit out of those who dont realise that the price has moved for a reason or learning how stocks trade/react following a stock 'going ex'. For a start, you could maintain a watchlist of stocks that have div events coming up (perhaps even up to 3 months in advance) and see if you actually like the thing, get involved and watch it appreciate at a rate slightly faster than you expect (as some investors do seek to lock in dividend income) and either get out before the event or wait until the stock comes back from the initial slump (almost a given for decent stocks), thus squeezing an extra few cents on top of what you'd normally expect. Watch out though, I am not from America so check your tax/entitlement rules as there may be penalties for collecting dividends then dumping the stock asap- a condition in some markets to stop speculators like us creating unneccessary swings and generally taking the mickey out of the idea of markets as investment mechanisms. Also, consider the fact that a lot of people dont know these really really basic principles i.e. if a stock is paying a dividend of 20c which you were entitled to yesterday but are not today, it's obviously worth 20c less in the very short term. It's a good test of value and you can trade these things profitably but I'm not about to tell you how I go about it. Tip number 1 though, if the stock doesn't drop the same amount of the value of the dividend, dont go jumping in and thinking normality hasn't quite set in yet. There are some big boys out there and they know how to push your buttons! Hope this helps guys. Don, do I get a job???
I understand dividends 101, nothing in that verbose post was anything new to me. I'm talking about a reverse conversion whereby one takes a short position in the SSF, and simultaneously takes a synthetic long position in the underlying(long call+short put). As long as you carry this position to expiration, you will realize the profit equal to the dividend paid. Is there anyone who has arbitraged dividends who can attest to this strategy?
today (12-27-07) is the ex date for a stock. If I buy it AFTER the open and hold til' the end of the day, will I receive the dividend? Thanks in Advance!
NO, you have to be the holder of record on record date. The SELLER gets it today! http://www.investopedia.com/terms/r/recorddate.asp
No, you have to have it in your account the night before. We use our internal sources for ex-div dates, making phone calls if necessary (hard to believe in this day and age, but true nonetheless). Don