Will I get dividend if I buy on record date?
Briefly, in order to be eligible for payment of stock dividends, you must buy the stock (or already own it) at least two days before the date of record and still own the shares at the close of trading one business day before the ex-date.
The record date will usually be the trading day following the ex-dividend date, which is the trading date the dividend is no longer owed to new buyers of the stock. To be eligible for the upcoming dividend, you must buy the stock at least two business days before the record date.
At the most basic level, you only need to own a stock by the ex-dividend date (or deadline) in order to get the dividend. And you can sell the stock a day or two after that, once everything settles. So in theory, you only need to own the stock for a couple of days to get the dividend.
Investors must have bought the stock at least two days before the official date of a dividend payment (the "date of record") in order to receive that payment. The company pays out the dividend to shareholders.
If you buy stocks one day or more before their ex-dividend date, you will still get the dividend. That's when a stock is said to trade cum-dividend, or with dividend. If you buy on the ex-dividend date or later, you won't get the dividend. The ex-dividend date is in place to allow pending stock trades to settle.
Only the shareholders of record in the company books on the record date will get the dividend. The ex-dividend date is at least one business day before the record date, which gives the company time to update its records.
The stock price drops by the amount of the dividend on the ex-dividend date. Remember, the ex-dividend date is the day before the record date. If investors want to receive a stock's dividend, they have to buy shares of stock before the ex-dividend date.
When it comes to investing for dividends, there are three key dates that everyone should memorize. The three dates are the date of declaration, date of record, and date of payment.
The day before the ex-dividend date is the last day to buy a stock and be eligible to receive the dividend payment. The ex-date is also the day when the stock price often drops in accordance with the declared dividend amount. Traders must purchase the stock prior to this critical day.
The record date finalizes the transfer of the stock's ownership. The new buyer is now the owner of record and is entitled to any dividends. The record date is set by the board of directors of a company and refers to the date by which investors must be on the company's books in order to receive a stock's dividend.
How long do I have to hold a stock to avoid taxes?
Any profit you make from selling a stock is taxable at either 0%, 15% or 20% if you held the shares for more than a year. If you held the shares for a year or less, you'll be taxed at your ordinary tax rate.
Companies that don't offer dividends are typically reinvesting revenues into the growth of the company itself, which can eventually lead to greater increases in share price and value for investors.
You have to own a stock prior to the ex-dividend date in order to receive the next dividend payment. If you buy a stock on or after the ex-dividend date, you are not entitled to the next paid dividend. If this sounds unfair, remember that the stock price adjusts downward to reflect the dividend payment.
After the declaration of a stock dividend, the stock's price often increases; however, because a stock dividend increases the number of shares outstanding while the value of the company remains stable, it dilutes the book value per common share, and the stock price is reduced accordingly.
Most stocks that pay dividends pay them every three months, after the company releases its quarterly earnings report. However, others pay their dividends every six months (semi-annually) or once a year (annually). Some stocks also pay monthly, or on no set schedule — these are termed "irregular" dividends.
The strategy is used by investors to capitalize on dividend payments made by a stock. The goal of this strategy is to buy shares of a company just before it pays its dividend and then sell those shares shortly after receiving the dividend.
This can be an important for dividend investors when buying a stock on the ex-dividend date. If you buy on or after the ex-dividend-date in regular trading, after hours trading or premarket trading, you do not qualify for the dividend. However if you buy the day before, even in after hours trading, you still qualify.
Ex-dividend date: This is the day after which dividend payments will no longer be paid to investors who purchase a stock. Record date: The dividend record date is the date which one must own shares in order to be eligible for dividend payments.
Preferred stocks have a different holding period than common stocks and investors must hold preferred stocks for more than 90 days during a 181-day period that starts 90 days before the ex-dividend date.2The holding period requirements are somewhat different for mutual funds.
| Stock | Forward dividend yield |
|---|---|
| Exxon Mobil Corp. (XOM) | 3.5% |
| Johnson & Johnson (JNJ) | 3% |
| Procter & Gamble Co. (PG) | 2.3% |
| Home Depot Inc. (HD) | 2.4% |
What are the three best dividend stocks?
| COMPANY | SECTOR | DIVIDEND YIELD |
|---|---|---|
| Bristol-Myers Squibb Co. (BMY) | Health care | 4.43% |
| Cisco Systems Inc. (CSCO) | Technology | 3.21% |
| Comcast Corp. (CMCSA) | Communication services | 2.86% |
| Skyworks Solutions (SWKS) | Technology | 2.51% |
To generate $5,000 per month in dividends, you would need a portfolio value of approximately $1 million invested in stocks with an average dividend yield of 5%. For example, Johnson & Johnson stock currently yields 2.7% annually. $1 million invested would generate about $27,000 per year or $2,250 per month.
Conversely, a stock can drop if investors think a company is paying out too much of its profit in dividends, which could leave less cash for investing in new businesses. But slow and steady prevails often enough that dividend stocks deserve a place in your portfolio.
| Stock | Trailing annual dividend yield* |
|---|---|
| Crown Castle Inc. (CCI) | 5.9% |
| Pfizer Inc. (PFE) | 5.9% |
| Boston Properties Inc. (BXP) | 6.2% |
| Kinder Morgan Inc. (KMI) | 6.2% |
Understanding a Wash Sale
The law states that if an investor buys a security within 30 days before or after selling it, any losses made from that sale cannot be counted against reported income.
