READ AND RE-READ THIS UNTIL YOU GET IT....Don't feel bad even the pros get confused!!
When Are You Entitled to Stock and Cash Dividends
Have you ever bought a stock only to find out later that you were not
entitled to the next cash or stock dividend paid by the company? To
determine whether you should get cash and most stock dividends, you
need to look at two important dates. They are the "record date" or
"date of record" and the "ex-dividend date" or "ex-date."
When a company declares a dividend, it sets a record date when you must
be on the company's books as a shareholder to receive the dividend.
Companies also use this date to determine who is sent proxy statements,
financial reports, and other information.
Once the company sets the record date, the stock exchanges or the
National Association of Securities Dealers, Inc. fix the ex-dividend
date. The ex-dividend date is normally set for stocks two business days
before the record date. If you purchase a stock on its ex-dividend date
or after, you will not receive the next dividend payment. Instead, the
seller gets the dividend. If you purchase before the ex-dividend date,
you get the dividend.
Here is an example:
Declaration Date Ex-Dividend Date Record Date Payable Date
7/27/2004 8/6/2004 8/10/2004 9/10/2004
On July 27, 2004, Company XYZ declares a dividend payable on September
10, 2004 to its shareholders. XYZ also announces that shareholders of
record on the company's books on or before August 10, 2004 are entitled
to the dividend.
The stock would then go ex-dividend two 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
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 fall by that amount after the ex-dividend date. A stock that has
gone ex-dividend is 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 is also after the record date).
If you sell your stock before the ex-dividend date, you also are selling away your right to the stock dividend.
Your sale includes an obligation to deliver any shares acquired as a
result of the dividend to the buyer of your shares, since the seller
will receive an I.O.U. or "due bill" from his or her broker for the
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 is the first business day after the stock dividend is paid.
READ THAT AGAIN!!!!