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?

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