For those hard core dividend investors, this post may seem a little trivial, but it will be of use for those just starting out on their dividend investing journey.

Date of Record

Dividend paying companies typically distribute their payments to investors on a quarterly basis.  When they declare their dividend, they typically state a date of record.  That is, the date in which the investors who own the stock on the record date will receive the distribution.

Seems easy enough right?  However, investors need to account for the settlement time.  That is, it typically takes 3 days after the purchase of a stock for the stock to settle (ie. to officially own the stock).  That’s where the ex-dividend date comes in.

Ex-Dividend and Cum-Dividend

The ex-dividend date is 2 days before the date of record.  Basically, if an investor purchases a dividend paying stock before the ex-dividend date, the investor will be entitled to receiving the dividend.  The time before the ex-dividend date is known as cum-dividend.

If the investor is looking to sell a dividend stock but would like to receive the upcoming dividend distribution, he/she would have to sell on or after the ex-dividend date to remain on the date of record.

Summary

I know, this stuff can be kinda boring but knowing these terms is important if you are, or becoming, a dividend investor.  The most important thing to remember is that if you want to receive the upcoming dividend, you need to own the stock (after settlement time) on the announced date of record.

15 Comments

  1. canucktuary on January 22, 2009 at 11:22 am

    In theory the price of the stock should adjust after a dividend payment is announced. So if you were to sell the stock before the ex-dividend date you would theoretically sell at a higher price.

    I’m not sure in practice if it always works out this way.

  2. Tommy on January 22, 2009 at 12:08 pm

    Question.
    If i bought the dividend stock before the ex-dividend date and sell it on the ex-dividend date or after, do i still entiled for the dividend payout?
    or do i need to wait til the payout date?

  3. nobleea on January 22, 2009 at 12:20 pm

    Tommy,

    you will get the payout regardless if you actually own the stock on the payout date. as long as you owned it before ex dividend.

    in a normal market, the stock will usually go down on the ex-div day by an amount almost equal to the dividend.

  4. Matt on January 22, 2009 at 12:51 pm

    How do dividend paying mutual funds and ETFs work? My MFs pay annual dividends but their underlying assets (stocks of dividend paying companies) distribute dividend quarterly. Is there a data of record for MF?

    Matt

  5. Jared on January 22, 2009 at 1:11 pm

    Hello,

    Is there a good list (ideally free), of all of the upcoming dividend dates for Canadian and American stocks?

  6. FrugalTrader on January 22, 2009 at 1:44 pm

    Matt, you would have to check with your MF with regards to the dividends that they receive. That’s the problem with dividend MF’s, their MER’s really dig into the dividend yields.

    Jared, I’ll work on a list!

  7. Erick on January 22, 2009 at 3:52 pm

    On a semi-unrelated topic…if you’re DRIPing your US dividends, how do you calculate the change in your ACB in Canadian dollars?

    I figured you could just use the exchange rate of the initial stock purchase…but what if you’ve made several purchases at varying exchange rates?

    Can you just use the exchange rate posted by the Bank of Canada for the date the dividends are re-invested?

    Thanks!

  8. Personal Finance Ology on January 22, 2009 at 10:01 pm

    Lesson Learned the Hard Way: You must buy a stock on the day before the ex dividend date to receive the next dividend.

    I bought some GE on the ex dividend date and then was very disappointed when I did not receive my dividend. Lesson learned. Thx for the good info. I didn’t know about the cum dividend.

  9. Dividend Growth Investor on January 23, 2009 at 10:33 am

    FT,

    Thanks for the detailed explanation. When people learn that they need to own the stock only for a short period of time they start deluding themselves that they could just capture the dividend and also have small capital gains. The main issue is that traders with a short-term mindset who are trying to take advantage of the dividend capture strategy could be exposing themselves to severe market volatility. This strategy could be profitable during bull markets as stock prices in general increase which would help the speculators in unloading their position at a profit; during bear markets when the volatility is very high, the risk of catching a big wave down is much higher

  10. Stock Investing Guru on January 24, 2009 at 1:50 pm

    Dividend investing is very important for times like these. Try preferred stocks and high-yield bonds. They are a much safer and less volatile investment during these tumultuous times.

  11. Sher on June 21, 2009 at 12:37 pm

    I was wondering if anyone has ever come up with a list of ex-dividend dates for Canadain Companies? And if they are will to share… Thanks

  12. Scott on August 20, 2009 at 9:34 pm

    In an efficient market, the price of the stock should decrease on the ex-date by the dividend paid as investors buying the stock on the ex-date are not entitled to the dividend paid. Having said that, I have done some research on the big 5 Canadian banks to see how efficient they are. My research results show that the market usually (90% of the time) does not care about when the dividend is paid. They are buying bank stocks for long term capital gains. I have been dividend trading around bank stocks for a while now and have done quit well.

    HOWEVER, do not forget about trading fees eating into your profits. I use Royal Bank direct. Their policy is that if you have less than 100K in your trading account or if you are not considered an active trader (something like 30 trades a month), your trading fee is 28.95 for every buy and 28.95 for every sell. If you have more than 100K in your trading account or are considered an active trader, the fee goes down to $7 per trade. I’ve actually used borrowed money on a line of credit at 5% and dumped it into my trading account in order to hit the 100K limit so that I can take advantage of the reduced fees for dividend trading purposes. You can just leave the funds uninvested, sitting as cash just as long as they are in your trading account.

  13. Martin on September 25, 2009 at 6:23 pm

    Scott,
    What do you mean by ‘I have been dividend trading around bank stocks’?
    Is it like buying stocks before ex-div date and sell it the day after ex-div.date?

  14. Jerry Fuchs on August 13, 2010 at 7:37 pm

    where can I find the actual qtrly div dates for a stock?

  15. khalid on November 9, 2011 at 4:51 pm

    Hi,

    What if I bought the stock on exactly ex-dividend date and then sell it the next day? Do I get the dividends or not?

    What would be a good resource for finding the exdividend date of canadian companies?

    I would apprciate if you could email me. Thnx

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