A:

If you sell before the ex-dividend date you will not receive a dividend from the company. The ex-dividend date is the date that the company has designated as the first day of trading in which the shares trade without the right to the dividend. If you sell your shares on or after this date, you will still receive the dividend.

If a shareholder is to receive a dividend, he or she needs to be on the company's records on the date of record. When you purchase shares, your name does not automatically get added to the record book- this takes about three days from the transaction date. Therefore, if the date of record is August 10, you must have purchased the shares on August 7 to receive a dividend. This would make August 8 the ex-dividend date, as it is the date directly following the last date on which you could get a dividend.

However, this is not necessarily a negative thing. Remember that a company's shares will trade for less than the dividend amount on the ex-dividend date than they did the day before. For example, imagine shares in a company are trading at $50 and the company announces a dividend of $5. Investors who hold the shares past the ex-dividend date will receive the $5; investors who sell before the ex-date will not. But all is not lost: shares in the company will fall by roughly the amount of the dividend, to $45, or there will be an arbitrage opportunity in the market. If shares didn't fall as a result of dividend payments, everyone would simply buy the shares for $50, get the $5, and then sell their shares after the ex-dividend date, essentially getting $5 free from the company.

For more information, read Declaration, Ex-dividend And Record Date Defined and How And Why Do Companies Pay Dividends?

RELATED FAQS
  1. Which mutual funds made money in 2008?

    Out of the 2,800 mutual funds that Morningstar, Inc., the leading provider of independent investment research in North America, ... Read Full Answer >>
  2. What are the dividend reinvestment options for a mutual fund?

    There are two primary choices for how investors can choose to handle dividend distributions made by mutual funds that they ... Read Full Answer >>
  3. Do mutual funds pay dividends or interest?

    Depending on the type of investments included in the portfolio, mutual funds may pay dividends, interest, or both. Types ... Read Full Answer >>
  4. Should I sell my shares if a company suspends its dividend?

    Since 2008, when the Federal Reserve slashed interest rates to zero and then kept them there indefinitely, dividend-paying ... Read Full Answer >>
  5. Do hedge funds pay dividends?

    Hedge funds rarely pay dividends to the accredited investors who invest directly in them. Instead, these investors share ... Read Full Answer >>
  6. Which mutual funds pay the highest dividends?

    For many people, the reliability of dividend or interest income is one of the primary benefits of investing. Like individuals ... Read Full Answer >>
Related Articles
  1. Fundamental Analysis

    The 3 Best Investments When Bull Markets Slow Down

    Find out why no bull market lasts forever, and why investors should shift their assets away from growth and toward dividends when stocks slow down.
  2. Investing Basics

    How And Why Do Companies Pay Dividends?

    The arguments for dividends include the idea that a dividend provides certainty about a company’s well being.
  3. Stock Analysis

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
  4. Investing Basics

    The Top 4 Income Investments for Retirees in 2016

    These four investment types should mitigate risk in 2016 for retirees seeking income.
  5. Mutual Funds & ETFs

    The 5 Best T. Rowe Price Funds for the Income Seeker in 2016 (TROW)

    Find out which T. Rowe Price mutual funds to use to create a diversified income portfolio for current income, income growth and capital preservation.
  6. Stock Analysis

    4 Energy Stocks for Income Seekers in 2016 (COP, CVX)

    Discover four energy companies that could maintain or even increase their dividends in 2016, making them the best investments for income-seeking investors.
  7. Mutual Funds & ETFs

    The 4 Best Fidelity Funds for Income Seekers in 2016

    Discover the four best fixed-income mutual funds administered and managed by Fidelity Investments suitable for income-seeking investors.
  8. Stock Analysis

    The Biggest Risks of Investing in Johnson & Johnson Stock (JNJ)

    Learn the largest risks to investing in Johnson & Johnson through fundamental analysis and other potential risks. Also discover how JNJ compares to its peers.
  9. Investing Basics

    How to Get More Yield From Your Investments

    Yield seeking investors can boost the amount of income their investments generate through tweaking their portfolio of stocks and bonds.
  10. Investing Basics

    4 Expensive Mutual Fund Mistakes to Avoid

    Mutual funds are a good way to balance your asset allocation but there some potentially expensive pitfalls investors need to be aware of.
RELATED TERMS
  1. Record Date

    The cut-off date established by a company in order to determine ...
  2. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through ...
  3. Profit Margin

    Profit margin is part of a category of profitability ratios calculated ...
  4. Dividend Yield

    A financial ratio that shows how much a company pays out in dividends ...
  5. Dividend Payout Ratio

    The percentage of earnings paid to shareholders in dividends. ...
  6. Dividend

    A distribution of a portion of a company's earnings, decided ...
Hot Definitions
  1. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  2. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  3. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  4. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  5. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  6. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
Trading Center