Can I buy a stock the day before it distributes dividends, and then sell after collecting the dividends?

Question

Is there a minimum amount of time that I have to own a stock before collecting a dividend?

Answer 1

No, because if you buy the day before the dividends are distributed, you will not receive any because you bought it after the "ex-date", ie the date on which you must be an owner of record to receive that dividend.

Take an example from Yahoo!Finance. Look up Microsoft (ticker: MSFT). Scroll down the right hand side until you see the column with four rows that says "Key Statistics." Here you have Forward P/E, P/S, and two dates. The first date is the Dividend Date, the second is the Ex-Dividend date, respectively for Microsoft they are 13-Sep-07 and 14-Aug-07.

This means Microsoft will pay a dividend on Sept. 13 2007 to all owners of record as of Aug. 14 2007. Were you to buy the stock on Sept. 12, 2007, you would not receive a dividend because Microsoft does not have you down as owner of record on Aug. 14 2007.

You may think about buying your stock on Aug. 13, 2007 and selling on Aug. 15, 2007. This is possible, but you will realize a loss. Stock prices are bid up before an ex-dividend date and drop after the ex - dividend date, precisely because other shareholders are doing what you're doing, buying before and selling after.

It is also quite likely that you will not be able to complete the transaction in time. A stock isn't actually "bought" when you pay for it in the sense that you have ownership and therefore the right to (1) receive dividends and (2) sell the shares. The transactions must be completed so that the ownership of the shares, as registered with the corporation whose shares you own, changes hands. This can take a few days, especially if you are purchasing from a short-seller.

If you want to buy a dividend-yielding stock (which is smart), buy it the day or so AFTER the ex-date, hold onto it, and then start reaping the dividends.

Also, bear in mind that if you hold stock for less than a year, your gains are taxed at your marginal tax bracket rather than the much-lower capital gains rate. This presents an even higher hurdle for holding stocks for the long term.

Answer 2

Absolutely...

However its a great way to waste your money.

The stock should decline the day it goes "ex-dividend" by the amount of the dividend...
Since the stock is worth the sum of all holdings of the company... and now the company is without that 1$ dividend... the price per share should be 1$ less.

you wont notice the difference on big stocks like GE.. since the dividend is small and the market is active... but look at some of the smaller high yield companies... they fall by give or take the amount of the dividend on those days....

For example.. Frontline (a shipping company with huge dividends) symbol FRO
you'd have bought it 6/5/07 at the close for 47.86... it paid you 1.50 per share.. and opened the next day at 45.29 (a drop of 2.57)
on 3/4/07 at close you'd have paid 34.61, collected a 2.05 dividend and sold at open on 3/5/07 for 29.69 .. a drop of $4.92


you get my point....

Answer 3

Yes you can buy a day before i.e on ex dividend date and sell it after collecting the dividend. Normally the stock will fall equal or more than the dividend amount depending upon the value of the stock at that time. It may recover or may not recover and continue to fall further.

Answer 4

NO. You must own it at the end of the trading hours on the last day before the ex-dividend date. Companies pay to "owners of record at the close of business on (some date)". Companies publish announcements of their next dividend, including the date that you have to own it on. Look for "News Headlines" on finance.yahoo.com. Note that owning the stock on the day that the dividend is announced by the company, or "declared" get you nothing.

You can sell it on the ex-dividend date and still collect the dividend. "ex-" is from Latin and is a legal term meaning "without", so ex-dividend means "I'm selling you the stock without the right to the dividend. This delay between the "of record" date and the "payout" date is from pre-computer days, when companies needed time to freeze the ownership records and type up all the checks.
Special tax treatment requires that you own it for 61 continuous fays during the 121 day period centered on the last day before the ex-dividend date.

Answer 5

Yes you can buy the stock the day before but in order to be eligible for the dividend your must OWN the stock on the EX date, If you buy the stock the day before the dividend is paid you are not eligible for the dividend.
Now on the other hand if you are the owner of the stock on the EX date and sell the stock before the dividend payout date you will still be paid the dividend.
To say it another way - Dividends are paid to the stock holders of record on the ex date.
Hope this helps

Answer 6

there's no assure that a inventory will pass down with the aid of the dividend quantity on x-div day. On uncommon events, it is going up greater advantageous than the quantity of the dividend. As occasion, look on the inventory TPZ. On Friday it replaced into x-div to the music of 12 cents. The inventory opened at $25.70, which replaced into precisely the day past to this's beginning much less the dividend, then without delay recovered - and ended the day at $25.ninety 4. in case you had shorted the inventory ( no ideas in this one ) hoping to hide on Friday, you will possibly have lost your shirt, and then some. and you will additionally be on the hook for the dividend fee to whoever offered your shorted shares.

Answer 7

If it were that simple, everyone would do it. First of all, the stock will go down proportionally after the dividend is paid. Second, you have to pay taxes on the dividend which would be deferred if you just bought a good company and held it.

Answer 8

Yes. As long as u buy before ex-date (when stock is still cd). After books closed, stock becomes xd. You can sell it off then.

www.soundinvesting.blogspot.com

Answer 9

when i buy a stock, when do i become the owner of record