Manage Your Exes

If you own a stock that pays a dividend, congratulations! The dividend can provide consistent cash flow to your portfolio. But how do you know when you’ll get the dividend?

Companies that pay dividends generally declare them once a quarter, or four times a year. Company ABC may say that a dividend of $0.30 per share is payable on Tuesday, August 15 to shareholders of record as of Monday, July 17. What does this mean for you? If you own the stock at the end of the trading day on July 17, then you are considered a shareholder of record. Even if you sell your shares before the August 15 payment date, you will still receive $0.30 per share for each share you owned on July 17.

What if you are buying the shares? When do you qualify for the dividend? Stock exchanges set an “ex-dividend date,” typically two business days before the record date, to allow time for processing the trading of stocks. Since the record date of July 17 is on a Monday, the “ex-dividend date” would be two business days before, or on Thursday, July 13. So, unless you were a shareholder of record before Thursday, July 13, you would not be entitled to the dividend for that quarter.

Stock prices typically adjust around the ex-dividend date to compensate for the loss of the dividend, so theoretically the shares of Company ABC will decline about $0.30 on July 13. Of course, the price of the stock will be impacted by other market forces as well, such as economic and political news, so the actual price change on that date may be more or less than $0.30.

How do you know when a company’s ex-dividend date is? You can check with your financial advisor or look it up on your online account. There are also several websites that provide this information, such as NasdaqDividend, and The Street.

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