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Friday, 04/04/2003

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 take Notice!

Until Next Time,

 
 

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