How to qualify to receive stock dividend?

Question

I see this:

Company X declared a quarterly dividend of $1.85 per share, payable Oct. 31 to shareholders of record on Sept. 29.

Does that mean I only need to buy the stock on that date to receive the dividend? Can I sell it the next day? How long do I need to hold the stock? Do I need to own it before the declared date? I just want to know of all the people and buy and sell the stock, how do they determine who gets the dividend?

Answer 1

The other poster is almost right. If you are the owner of record at the close of trading on September 29, then you will be paid a dividend even if you sell on September 30. However, it takes time to settle a trade. So, if you buy the stock on the 29th, you might not become the holder of record until October 1, and will miss the dividend.

For this reason, the stock exchanges will announce an "ex-dividend date" which is usually two days before the declaration date. Those buying on or after the ex-dividend date do not receive the dividend. In this case, the stock would start trading ex-dividend on the 27 of September for settlement on September 30th. If you bought it on the 26th (for settlement on the 29th) and sold on the 27th, you would get the dividend.

This would also be a silly thing to do, as the price will drop on the ex-dividend date by the dividend amount and you would have two-way transaction costs..

Answer 2

Previous posters have it right, but not quite.

There are different types of dividends.

A special dividend is deceiving.

You may see once and awhile a company that declares a two dollar special dividend on the dividend date.

That means they pay their regular dividend and have a stock adjustment which is similar to a stock split.

The stock drops by two dollars, but not by the amount of the regular dividend.

You get paid that $2.00, but that doesn't mean the stock will go right back up either.

Perfect example:

Microsoft announced about two years ago a special dividend of $3.00 a share.

On the payment date, Microsoft stock dropped about $3.00.

Today, it's a few more dollars a share lower than it was when it dropped, meaning if you owned it for the past two years, it did nothing for you but drop a little and pay a small dividend along the way.

That doesn't mean it will continue dropping. I feel it is poised to go back up to where it was before they paid the special dividend.

So owning it now may be better than playing the stock for the dividend.

Dividend plays don't always go like you expect them to go.

Ford Motor just slashed their dividend in half.

Still, it climbed a bit higher in recent days because it was beat down so much.

So, to finalize this answer...Dividends don't determine stock prices...other more important factors determine stock prices.

You may gain on a dividend play, or you can lose out.

Answer 3

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Answer 4

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Dividends aren't paid on a percentage basis. The are paid on a dollar amount. Using your example, if you have a $10 stock that has a 7% dividend, that indicates that the company has paid out $.70 in dividends over the course of the last year. Assuming they keep the same dividend level, you can expect to receive $.70 per share, or $7.00, over the course of the next year for your 10 shares. If the stock price rises to $12 per share, your $.70 per share dividend is now only 5.83%. If the stock falls to $8 the dividend is now 8.75%, but the amount of the dividend hasn't changed.

Answer 5

Dividend Eligibility

Answer 6

Company X declared a quarterly dividend of $1.85 per share, payable Oct. 31 to shareholders of record on Sept. 29.

Does that mean I only need to buy the stock on that date to receive the dividend?
You need to have bought the stock so that you are the owner of record on Sept 29. Usually that means you have to buy it 3 business days before.

Can I sell it the next day?
Yes. However, if there is no change in value of the stock it will go down $1.85 on the morning of 9/29 to reflect the dividend paid.

How long do I need to hold the stock?
1 day.

Do I need to own it before the declared date?
No, just on the record date.

Answer 7

In order to get the dividend you have to have owned the stock on the date of record.

Yes, you can sell it the next day and still recieve dividends. The period of time between the date of record and the payable date is really just administrative time to get the money issued.

For example: if you bought the stock on Sept 29 and sold it on Oct 1, you would get the dividend. If you owned the stock and sold it on Sept 28, or bought the stock on Sept 30, you do not get the dividend

Answer 8

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Answer 9

Identify what is called the ex-dividend date. If you are a holder of record (own) the stock at the end of that business day, you will get the dividend, even if you sell the next day.

Yahoo Finance for the stock ticker will have the ex-div date in "Key Statistics"

Answer 10

Yes, you'll be taxed on any capital gain. Not that complicated if you keep track of it over the years. Your cost basis will be different for the shares purchased with the dividends. Each lot purchased with each dividend payment will have a different cost basis. Trying to reconstruct it after a number of years is really hard.