Ex-dividend date
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The ex-dividend date is the date, preceding the "owner of record date" allowing for the settlement period. The ex-dividend date is typically two trading days before the record date. Therefore, in order to receive the upcoming dividend payment payout, you must own or must purchase the stock prior to the ex-dividend date. In most countries, when you buy or sell any stock, there is a three trading-day settlement period on your order; if you purchase a stock on Thursday, the purchase does not settle until Tuesday. The same applies when you sell a stock.
Example of how a company would announce its dividend payout: Company XYZ announced today that its quarterly cash distribution of $0.10 per share will be paid on April 15, 2009 to shareholders of record at the close of business on March 31, 2009.
From the example above, the record date is Tuesday March 31, 2009, and the ex-dividend date is Friday March 27, 2009. To be a shareholder of record on Tuesday March 31, 2009, you must purchase the stock before the ex-dividend date. In this case, you must have purchased XYZ stock on or before Thursday March 26, 2009 and not have sold it until or after Friday March 27, 2009.
You must be a stockholder on the record date to receive the dividend payment and you only have to own the stock for one day to be entitled to receive the dividend payment. The dividend payout will be deposited into your account on the payout date. In the example above, that date would be April 15, 2009.
Tax effects
There may be tax impacts if you are holding a stock or fund on the ex-dividend date[1]. The dividend is paid out regardless of how long you held the stock or fund, and that may be taxable income to you.
[edit] References
- ^ Farrell, Chris. "Taxes and the Ex-dividend Date". http://www.publicradio.org/columns/marketplace/gettingpersonal/2008/01/question_when_selling_a_stock.html. Retrieved on 2008-12-23.
[edit] External links
- Some helpful links to Ex-dividend.com which also explain Dividend Capture
- And Ex-dividend Date
- SEC page on Ex-Dividend Date
- NASD (Nasdaq) document on ex-dividend dates
- US, UK and Canadian Ex-Dividend Date Research Center
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