Dividends

Discussion in 'Trading' started by NasdaqTrader, Apr 15, 2003.

  1. This might be a stupid question but...if you buy a stock on the day before the ex-dividend date,i assume that you are entitled to the dividend even if you sell your position the next day on the ex-dividend date?
     
  2. trdrmac

    trdrmac

    I think you have to be an owner on the "Date of Record" this is generally 3 days before the x-dividend date from what I remember.
     
  3. Anyone else know for certain because i always wondered about this too?
     
  4. Ex-dividend is the date that the stock trades without the right to recieve the dividend and has already accounted for the date of record. If you own it before the ex-date and sell on the ex-date, you will recieve the dividend.
     
  5. so what is the minimum of days u can hold the stock and still get the dividend ?
     
  6. trdrmac

    trdrmac

    It is going to be around 3. But the stock will drop by the corresponding amount of the dividend. So you will need to compensate for the Div.

    OTCM is one that I own. It pays about .25 per quarter, it went X on March 11 and paid the div around the 23rd. The price just climbed back above the price prior to the stock going x dividend.


    To "Capture" the dividend profitably you either need to get additional price appreciation or find a situation where selling an in the money call justifies the price risk that you assume.
     
  7. Here's a typical example.

    Declaration Date - March 15 - Company declares a dividend of $0.50 "payable on May 1 to shareholders of record on April 18".

    Ex-Dividend Date - April 16 - In this case you have to be the owner of record at the end of the day on April 18 to get the dividend. Stock transfers take 3 business days in the U.S., so to get this dividend, you have to own the stock at the end of the day on April 15. The ex-dividend date is the next day since "ex-dividend" means trading without the dividend.

    Record Date - April 18, as stated in the company's press release.

    Payment Date - May 1, as stated in the company's press release.

    Bottom line is - you only need to own the stock overnight to get the dividend. Of course, since it trades ex-dividend the next day, in theory you won't make or loose money due to the dividend payment.
     
  8. Yes; you need to own it AT THE CLOSE the day before it is ex-div. You can sell it in the afterhours and still get the dividend, so theoretically you could own the stock for <5sec and still get the div, if you bought it at 3:59:59 and sold it at 4:00:01.

    Definitely not a stupid question; it's confusing and I remember it as ex-div being the first day without dividend.
     
  9. trdrmac

    trdrmac

     
  10. Not 100%, as I've never cut it that close and don't usually play dividends anyway. But if you look at charts of stocks into the close the day before they go ex-div, you will see a spike down after the close, in the amount of the dividend payment. Or, of the stock doesn't trade in the afterhours, the ex-div day open will be the previous day's close minus the div amount.
     
    #10     Apr 15, 2003