Dividend question!!!?

Question

I wanted to know if you can receive a dividend without holding onto a stock for a long period of time. What are the normal limits regarding the distribution of dividends?

Can an investor purchasing on the day before the ex-div-date receive the dividend? If so, may he sell on the ex-div-date, which is the following day, and still receive the dividend?

Lastly, is there any effect of the ex-div date on the price of the stock?

Answer 1

Yes, you can do this, but....

1) The stock price usually falls when it goes x-div, so you often lose as much on the stock as you make on the dividend.

2) If you don't own the stock for 60 days, the dividend will non-qualified, which means that it's taxed as ordinary income.

Answer 2

The owner of the stock on the day before the ex-dividend day will receive the distribution. Most companies in the U.S. have a quarterly distribution. You have to calculate the payout ratio( a large payout ratio has an effect on the price of the stock), the dividend yield and the stock volatility in order to evaluate your proposal. From an academic standpoint, the dividend is paid from the cashflow and if it is withheld, then it will go to retained earning which will increase the shareholder's equity(stock value) of the company and vice versa.
Without spending any money, study these high dividend paying companies: czn (6.8%/4=1.7%), NYB(6.1%/4=1.525%), WM(5.0/4=1.25%)
Incidently, WM dropped 2.6% today (2/8/2007), czn increased .54%, NYB dropped .94%
Eboudames

Answer 3

As long as you own it on the ex-div-date, you are entitled to the dividend. The stock price will typically decline by the dividend amount though.

You can see upcoming dividends at the following link:

http://www.top10traders.com/Dividends.aspx

Answer 4

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