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If you’re wondering what is the last day can you buy/sell a stock and still get/keep a declared dividend – the ex-dividend date is your answer.
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What is the ex-dividend date?
The last day to buy or sell a stock and still receive the declared dividend is called the ex-dividend date.
This date is usually set two business days before the record date, which is the date when dividends are actually paid out.
This gives time for the stock exchange and other financial institutions to properly update their records and reflect any changes in ownership.
As for the dividends themselves, they are typically paid out within 2 months after the release of annual results.
When a dividend is paid, it usually comes from the profits of the company, or from accumulated reserves if no recent profits have been made.
To reward long-term investors, companies often declare dividends and set an ex-dividend date so that only those who have owned the shares prior to this point can benefit from them.
How can I find out the ex-dividend date
You can find the ex-dividend date by consulting with your company – it should be public information avaliable on their website or in their results release.
Let’s look at the ASX itself as an example – yes, it is a listed company in its own right. It has a specific page on its website depicting upcoming dividend dates.
Great, so should I just buy before then and sell after I’ve got the dividend?
Maybe you could. But investors need to keep a few things in mind.
First, there’ll be a wait for the dividends.
Second, although they may purchase a stock after this date and hold until payment, they will not qualify for any future dividend payments unless they again purchase the stock before the next ex-dividend date.
Third, by buying and selling you may miss out on share price rises that can occur due to good news from the company. You may also cost yourself money in trading fees.
And fourth, investors should be aware that once a stock goes ex-dividend, its price typically drops by the amount of the dividend since some buyers will be purchasing without receiving it. This could result in lower short-term capital gains taxes for sellers if they sell before or on an ex-dividend date.
What’s most important to remember
But remember above everything else, to be eligible for the dividend payment, investors must have purchased the stock prior to this ex-dividend date.
After this point, any shares purchased will no longer be eligible for the declared dividend.
So you need to time your run perfectly.
Ultimately, while dividend or income investing is a legitimate investing strategy, investors shouldn’t just buy in and sell out of companies just to get dividends. The key is buying great companies at a low price!
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