Dividends

Mar 26, 2010

Stocks Simplified Writes
by: Shaun

It is a little confusing, so bare with me.

First remember that dividends are not free money; they are taken out of the price of the stock. So for instance if the stock trades at $60 and is paying out a $.50 dividend it will be trading at $59.50 and give out $.50.

There are actually 3 dates to watch. These are the Ex-dividend date, the date of record, and the date when the dividends are actually paid.

The Ex dividend date is the date when the dividends are taken out of the price of the stock, two days later is the date of record, when the company checks its record to see who owns the stock.

Why 2 days later? It takes 3 days for the company to get updated on who owns the stock, in order to make sure that the people who bought the stock before the ex-dividend date and held it through it, the date of record needs to be 2 days after the ex dividend date.

In your example you do not need to hold the stock at May 12 to receive the dividend you don't even need to hold it on March 31st, you only need to hold it through the ex dividend date, which should probably be between March 28-29.

Just remember that any dividends you do get will be taken out of the price of the stock first. So if you are planning on buying a stock just to get the dividend payment and then sell it don't bother. You will end up with roughly the same amount of money and have to pay dividend taxes on some of it.

Dividends

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Dividends