In the world of courting and finding Mr. or Mrs. Right, a critical part of this journey is dating. Same goes for the dividend investor. Any do-it-yourself (DIY) stock investor, who is planning to live off their stream of dividend income, needs to know their dates. Here are four dates My Own Advisor wants you to know as a dividend investor:
Dividend Declaration Date – the date the dividend is declared by the company’s Board of Directors.
Ex-Dividend Date – the first date the stock will trade without the right to receive a dividend. Meaning, if you buy the stock on this date, you will not be eligible to receive the dividend on the upcoming payment date. To receive the dividend payment, investors need to purchase the stock before the ex-dividend date. Also on this day, the price of the stock often drops by the amount of the dividend, from the last price in the previous trading session – to offset the dividend payment you are no longer eligible for.
Record Date – the date investors must be registered as shareholders to receive the dividend on the payment date. To be a shareholder of record, investors must purchase the stock at least 3 trading days before the record date. This time period allows your stock purchase to settle in your account and put you “on record”.
Payment Date – the date on which the dividends are actually payable to investors.
Most companies have these dates listed on their “Investor Relations” or “Investors” web page. Finally John Heinzl produced an excellent video describing these dates if anything above was confusing.
If you’re going to fall in love with stocks you better get some practice dating, to find out what you’re really getting yourself into.