Clarifying Ex-Dividend Dates and Record Dates

We think there is a bit of confusion by some investors on when one is entitled to receive dividends so we thought a little blurb might help (or confuse folks more).

To be entitled to receive a dividend on a stock you need to own the shares PRIOR to the ex-dividend date.  For instance on the quick capture we lucked into last week we purchased the shares on Thursday (11/29/2018) as the shares had dipped down and we were able to snag them at $21.85–before the day was out the shares bounced back to $22.19 on the close Thursday.

The purchase of the shares on Thursday means the purchase will ‘settle’ on Monday (12/3/2018) which is the record date –always 1 day AFTER the ex-dividend date.  The ex-dividend date was Friday 11/30/2018.

The shares were bought on Thursday but sold on the ex-dividend date meaning the sell will settle on Tuesday.  This means I was the owner of record on Monday (the record date) as the sell settles on Tuesday.

To simplify the above–simply own before the ex-dividend date–then you can sell anytime on or after the ex-dividend date to be entitled to the dividend.

In this case I capture the 47 cent dividend and because I bought at $21.85 Thursday and sold at $22.10 Friday I have a 25 cent capital gain for a total profit of 72 cents.

10 thoughts on “Clarifying Ex-Dividend Dates and Record Dates”

    1. D–thats right. In this case it was a $280 dollar ‘step’—as Grid would say ‘a few steak dinners’.

  1. Thank you TIm. Would it be safe to assume in your example that the XD starts (i.e., rights to DIVY ends) at the start of after market hours on Thursday 11/30 ?
    Another nebulous area to some that you may consider shedding some light if time permits may be the hold period for a QDI DIVY. Thank you.

    1. Hi aarod–the minute the market closes the day prior to ex-dividend means you are ‘out of luck’ for ownership.

      Yes I will do something on holding periods–I don’t worry about it because most of my holdings are in an IRA.

  2. For purposes of the ex-dividend date, the extended trading hours are included as part of the trading day That’s both pre- and post-.

  3. Thanks for this valuable article. When I started this, I have found that there can be a couple nuances that are important to understand, and that many of the online articles just gloss over those issues. And I have even found instances where very reliable sites, including brokerage sites, show an incorrect ex-dividend date. One level of confusion arises from the word “days.” It is always important to distinguish between calendar days and business days. Your example made clear that you were talking about business or trading days, as you used a Thursday trade that settled on Monday. Thanks for using that example. Around Christmas and Thanksgiving we have to be careful for market holidays, as the T+2 settlement system always refers to days when the market is open. For preferred shareholder investors, if you suspect the market is misplacing a security, it is important to check the prospectus. Companies do not set the ex-dividend date; they set the record date. A prospectus might say that the record date is the last trading day of a quarter. It might say the record date is a date set by the board at the end of the quarter (in which case you have to check press releases). (Some website use projected ex-dividend dates until the release comes, and some investors might incorrectly calendar a projected date for buying or selling, only to be unpleasantly surprised to learn that projection wasn’t quite correct.) And some set a fixed date (e.g., June 30) regardless of whether that day is a weekend or holiday. That can also cause confusion. I believe that to be an owner of record on Saturday, you really have to be an owner of record on Friday. Nothing settles on Saturday or Sunday.
    Two other nits to consider. First, I think all stocks settle T+2. But I believe there are some bonds that settle T+1. So be careful if you plan to sell a bond after capturing an interest payment. Second, this topic is also important for individuals who own “in the money” options and decide to exercise prior to expiration in order to capture a common stock dividend. I think there are many investors who have the impression that option exercise is instantaneous. It is not. Options also require time to settle, and an investor can lose the dividend by failing to exercise without sufficient time to become a record owner.

    1. Thanks for your input Roger. There certainly are plenty of nuances I don’t have to deal with because I seldom mess around on captures so timing is not much of an issue as I ‘buy and hold’.

  4. Words of wisdom from Investopedia:

    …always keep in mind that when you’re investing in a dividend paying stock, it’s more crucial to consider the quality of the company than the date on which you buy in.

Leave a Reply

Your email address will not be published. Required fields are marked *