How is dividend paid out?

Question

How is dividend paid out? If the pay out date is 7/1/07 and you bought 100 share @ $10 on 6/30/07. On 7/1/07, company pays out 14% ($1.40) dividend. Does the time factor plays role on how much dividend is paid out? Or he/she would get full $140 in dividend?

Answer 1

You have to buy long before the payout date. The date you need to buy before is called "ex-div."

You can sell before the payout date and still get the payout. This is traditionally a hobby of profoundly stupid people. I say this because they apparently never notice that on ex-div day, the price of the stock is automatically adjusted downwards by the same amount as the dividend payout coming up.

Between that and commissions, any profit they receive is purely luck.

Answer 2

Whoever is the owner of record of the stock at the time of the dividend gets the whole dividend. The seller has likely adjusted his price upwards in anticipation of the dividend, and the stock price may decline just after payout, for that reason.

Answer 3

The price of the stock will decrease by the amount of the dividend the day the stock goes ex-dividend.

There is one other way dividends are paid out. For most stocks you may choose to buy additional shares with your dividend. These fractional shares will increase your investment and you will participate in the magic of compounding.
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Answer 4

Dividend is paid by cash or cheque or kind