How Dividend Dates Work When You Actually Get

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Among the subscribers to The Dividend Hunter, there is a wide range of stock market investing
experience. From the emails I receive, I know that it is easy for both beginners and more experienced
investors to have trouble keeping up with how companies announce dividends and when you actually
see the cash in your brokerage account. Here is a quick primer on everything I think would help you
keep track of when your income stocks will pay dividends.

Dividend Announcements

First, ongoing dividends from any stock are not guaranteed. A company's Board of Directors will review
the financial results of the business each quarter and then announce the next dividend or distribution.
Monthly dividend stocks may or may not announce three monthly payments at a time. Each new
dividend announcement will include at least three pieces of information:

• The amount of the dividend payment per share.

• The record date.

• The payable or payment date.

The announcement may also include an ex-dividend date, but it is not required. The ex-dividend is
determined from the record date.

Shareholder of Record

You are entitled to and will receive a dividend payment if you are a shareholder of record on the record
date. To be an owner of record, you must have purchased the shares with a trade or trades that settled
on or before the record date.

Settlement is the period of time it takes for a stock trade to become official. When you buy shares
through your brokerage account, the trade officially settles two business days later.

The two days are to give you time to deliver the money to your broker and the seller to deliver the shares.
In the modern world, the transactions happen electronically, and your broker shows results in your
account almost immediately.

Yet, under the SEC rules, you are not officially a share owner until two business days after you get a
filled buy order in your brokerage account.

Ex-Dividend Means No Dividend Would Be Earned

Since we know it takes two days for a stock purchase to settle and become official, someone who buys
shares one business day before the record date will not become a shareholder of record until one day
after the record date and will not receive the dividend. Thus, a stock goes "ex-dividend" one business
day before an announced dividend record date. You need to know several facts about the ex-dividend
date.

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If you buy shares the day before the ex-dividend date (two days before the record date) and sell
on the ex- dividend date, you will be a shareholder on the record date and earn the dividend.

On the ex-dividend date, the share price is adjusted by, and usually starts trading at the previous
closing price minus the dividend amount.

For example, if a stock closed at $25.00 the day before the ex-dividend day and a $1.00 dividend was
declared, the stock will open on the ex-dividend date at $24.00 per share. The financial websites will
show this as no change in share price. If the stock is at $24.10, the change would show as up $0.10
for the day.

The share price drop keeps traders from taking advantage of Fact 1.

Business days are the days the stock exchange is open for trading. When counting back from the
record date, we do not count holidays and weekends.

I like to buy shares to add to a position after a stock goes ex-dividend. It feels like a deal to purchase
shares at the lower price.

When Do You Get the Money?

Dividend paying companies transfer the money to your broker on the payment date listed in the
dividend announcement. Your brokerage account may show the deposit on the declared payment
date or one day after the payment date.

In order of occurrence, the timing starts with a dividend announcement, then the ex-dividend and
record date a couple of weeks later, and the payment after another two weeks, resulting in about a
month between the dividend announcement and when the cash distribution lands in your brokerage
account.

Be aware, however, that this is just the average and the spread between dates can vary significantly.
One of our long term Dividend Hunter portfolio stocks announces a dividend up to seven weeks before
the ex-dividend date.

Meanwhile, another portfolio stock – one that happens to be one of my favorites for high-yield
investors – pays the dividend a full month after the record date.

Dividend announcements may be separate news releases or included in a quarterly earnings press
release.

Land, Fly or Die,

Tim
Plaehn
Editor
The Dividend Hunter
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