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The Dividend Process
As we've noted in past articles, dividend-paying stocks are becoming
more attractive to investors in the wake of a much lower tax rate
and increased payouts from companies. All too often, though, people
miss out on a payout because they are unaware of the dividend cycle
and do not own the stock on the right day. Here's a primer on the
dividend process that should eliminate miscues and aggravation:
First is the "declaration date," which is the day the company's
board of directors announces that it will pay a dividend and
declares the amount of the dividend payment (e.g., 30 cents a share)
and the "record date."
Next to come is the "ex-dividend date," which usually comes 3-4
business days before the record date. On the ex-dividend date,
people who purchase the stock, which requires three days to settle,
are no longer entitled to receive the dividend. Since the new
investor does not show up on the company's books as a shareholder,
the dividend goes to the person who previously owned the stock.
Also, the stock price will usually drop by the amount of the
dividend when it opens for trading on the ex-dividend date.
On the record date the company receives from the registrar a list of
current shareholders who are entitled to dividends. To receive the
dividend, you must be on the company's books on the record date.
Finally, there is the "payment date" when the company cuts dividend
checks or deposits the dividend into the shareholder's brokerage
account. This is usually two weeks after the record date.
For dividends paid in shares of stock, the dates are different. The
ex-dividend date, in this instance called the "ex-distribution
date," comes after the payment date instead of after the declaration
date. The ex-distribution date is usually the business day after
payment by the company. This also applies to stock splits.
If you have a question or problem with dividends, contact the
dividend department at your brokerage. This department is
responsible for making sure that all clients receive the proper
dividend at the right time.
For more timely trading tips:
http://clix.to/wallmann
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