What do you mean my stock has gone Ex-Dividend?
by Steve Gail
It happens everyday, you make a stock purchase and somewhere,to your surprise, you don't receive your dividend, either as cash or in additional shares or fractional shares. You know you own the stock. You even have confirmation of that fact you own the stock. Unfortunately, you may have become victim of Ex-Dividend shock.
Ex-Dividend shock comes from purchasing a stock to late in the chain of paperwork. There are two dates that you must become extremely familiar with so that you will never experience the aforementioned event again. The two dates are as follows:
1. The "Record date"
2. The "Ex-Dividend date"
When the board of directors declare a dividend, the board sets a
date that you must be on the company's register as a stock shareholder. If you are not on the books at that time, you will not receive a "dividend payment"
Companies determine who will be sent proxy statements, quarterly
reports and other financial information by this date. Now, after
the company sets what is known as the record date, at this point,
the N.A.S.D determines and sets the ex-dividend date. This
Ex-date or ex-dividend date is normally set for stocks two
business days before the record date. (so for example, If you
purchase a stock on its ex-dividend date or after its ex-dividend
date, you will not receive the next dividend payment. Instead,
the individual that sold you the stock will get the dividend. The
bottom line is, If you purchase the stock before the ex-dividend
date, you get the dividend payment.(cash or stock)
SEE EXAMPLE BELOW
On July 27, 2002, Company RQS declares a dividend payable on
September 10, 2002 to its shareholders. RQS also announces that
shareholders of record on the company's books on or before August
10, 2002 are entitled to the dividend. The stock then goes
ex-dividend two (2) business days before the record date.
In this example, the record date falls on a Tuesday. Excluding
weekends and holidays, the ex-dividend is set two business days
before the record date or the opening of the market - in this
case on the preceding Friday. This means anyone who bought the
stock on Friday or after would not get the dividend. At the same
time, those who purchase before the ex-dividend date receive the
dividend. With a significant dividend, the price of a stock may
move up by the dollar amount of the dividend as the ex-dividend
date approaches and then decline by that amount after the
ex-dividend date. ex-dividend stocks are marked with an "x" in
newspapers on that day. Sometimes a company pays a dividend in
the form of stock rather than cash. The stock dividend may be
additional shares in the company or in a subsidiary being spun
off. The procedures for stock dividends may be different from
cash dividends. The ex-dividend date is set the first business
day after the stock dividend is paid (and after the record date).
If you sell your stock before the ex-dividend date, you also sell
your right to any stock dividend or spin off. The sale includes
your obligation to deliver any shares acquired from the sell of
your shares to the buyer of your shares, You as the seller will
receive a "due bill" from your broker for the additional shares.
Thus, it is important to remember that the day you can sell your
shares without being obligated to deliver the additional shares
is not the first business day after the record date, but usually
the first business day after the stock dividend is paid.
DRIP buyers should pay special attention to these aforementioned
dates, as they could greatly affect future shares that you
anticipate getting from your DRIP plans. DRIP buyers, Please
Until Next Time,