Dividend Dates

I’ve been doing some research into dividends for a project I’m working on – I thought the various dividend dates would make an interesting post for anyone who owns dividend paying securities – either stocks or mutual funds.

Dividend dates are the relevant dates surrounding the dividend payments. These are important to know because if you own a stock or mutual fund that pays a dividend, the owner of the security on the day the dividend is paid is not necessarily the person who gets the dividend.

Payment date – this is the date that the company actually pays the dividend to shareholders who are eligible.

Record date – any shareholders as of this date will get the most recent dividend. If you are buying a mutual fund and want to avoid getting the next dividend then wait until after the record date to buy it. If you are selling a mutual fund and want to avoid the dividend then sell it before the record date.

Ex-dividend date – this is two business days before the record date – someone who buys the stock on
this date or later will not get the dividend.

Most companies have this information on their investor relations web page. For any particular stock or mutual fund, just go to the main website of that company and look for “investor relations”.

Why is this boring information important?

Mutual funds can sometimes pay large dividends at year end. With mutual funds, the unit price goes down by the amount of the dividend so when a dividend is paid, you don’t have any more money in the account. The problem with buying a mutual fund just before it pays a dividend in a taxable account is that you will get nailed with taxes which is not a good thing. This post covers a mistake that Moolanomy made when he bought a mutual fund just before it paid a big year end dividend. In his case, it wasn’t lack of knowledge of the dividend dates that caused the problem but his situation does illustrate why it’s important to know the dividend date details.

Let’s look at an example!

Bank of Montreal (BMO) – if you look at the investor relations dividend page, then you can see that the August dividend will be paid on August 25 and the record date is August 1. The ex-dividend day will be July 30 so if you buy the stock on July 30 or after then you won’t get any dividend. If you own the stock and sell it on July 30 or July 31 then you will still get the dividend. The reason for this is because of the 3 (business) day settlement period. You don’t really own the security for the purposes of the dividend until the trade settles on T+3 so for example if you buy a security on Aug 25 then you don’t really ‘own’ it until Aug 28 and will only get dividends if the record date is Aug 28 or after.

If you are looking for more information on mutual funds, index funds and ETFs then sign up for a Morningstar free account.  Morningstar is the industry leader in investment information.

16 replies on “Dividend Dates”

Hi, I think the dividend ex date is always *before* the record date – 2 business days before the record date.

So, a shareholder has to own the stock at the open of the dividend-ex date to get a dividend.

Yeah, that was a painful experience. The dividend was much larger than I had anticipated. Thank you for the reminder because this is about that time of the year again — double whammy time.

DividendMan, I was going to say the same…

Mr. Cheap, no, if the stock changes hands during that period, the owner “of record” (on the record date) still gets the dividend.

The difference between the ex-dividend date and the record date is that there is a 3(?) day delay between buying a stock and becoming the shareholder of record (when the shares “settle” in your name — you also generally have a few days to pay after buying). So for your BMO example, you could sell the shares on July 30 or 31 and still get the dividend, because you would still be a shareholder of record on Aug 1 — they wouldn’t get around to recording your sale (settling the trade) on those days until Aug 2 or 3. If you didn’t own any BMO, you would have to buy by Jul 29 to get the dividend.

What Potato said, be aware of the settlement lag

I sometimes wonder if it’s worth it to just buy & sell to get the dividends, especially for Income Trust monthly dividends

Jerry, remember that dividends are usually announced well in advance of the ex-date, so investors know how much money will be flowing out. Therefore as the ex-date approaches, the stock price will naturally include the upcoming dividend. All else being equal (and it never quite is, of course), trading will open lower on the ex-date, by roughly the amount of the dividend. This is especially true for income trusts with big yields, and double-especially if they’re making return of capital distributions.

Potato: Are you sure about the selling before Record date? I talked to a rep at BMO Investorline, and he said that one must can not sell a stock on or before Record date if you want the dividend. If he’s right, the shortest time period stock needs to be held is: buy a day before the ex-date and sell next day after record date. Does anybody have more info on this?

Leave a Reply

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