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Ex-Dividend Date Question

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Hi

I am new to stock investment. I have a question related to Ex-Dividends date.

I buy shares from my online broker. The broker quote me a price for 15 seconds, I buy the share if I accept the price within 15 seconds. However, it normally takes several days to "complete" the purchase. My question is that whether I am eligible for dividends at the point I accept the price and buy the share OR I have to wait until it completes?

For example, if a company has Ex-dividend date on 15th. If I buy a share on 14th, it will be "completed" by 18th. In this case, am I eligible for dividend on 15th?

Many thanks

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Yes. If you buy the share before or at close of business on the 14th, then you will receive the div if the ex-div date is the 15th. If you buy at open of business on the 15th, you will not receive the div.

There is a different date called the "record date". This is the date that the list of shareholders is checked, to work out who gets the dividend. This is a few days after the ex-dividend date.

The idea is that the ex-dividend date is the date at which if you agree to buy, you will not receive the dividend (there will not be time for your name to go onto the shareholders list prior to the record date). If you look at the price, if share price will drop on the ex-div date, in recognition of the fact that if you agree to buy you will not be getting the next dividend.

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Yes. If you buy the share before or at close of business on the 14th, then you will receive the div if the ex-div date is the 15th. If you buy at open of business on the 15th, you will not receive the div.

There is a different date called the "record date". This is the date that the list of shareholders is checked, to work out who gets the dividend. This is a few days after the ex-dividend date.

The idea is that the ex-dividend date is the date at which if you agree to buy, you will not receive the dividend (there will not be time for your name to go onto the shareholders list prior to the record date). If you look at the price, if share price will drop on the ex-div date, in recognition of the fact that if you agree to buy you will not be getting the next dividend.

Though it normally makes no differences anyway as if you buy after the XD you pay less (by the amount of the dividend). Given the time value of the cash to be paid/rebated few months later, it is actually better to buy XD.

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@ChumpusRex: Many thanks for your reply. I learn a lot from you.

You mentioned there is also a "record date", which is a couple of days after the ex-dividend date. Does that mean if my purchase transaction cannot be completed by that day, I am still not eligible for dividend? Does buying at the day prior to ex-dividend date guarantees dividend payment?

Many thanks.

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@ChumpusRex: Many thanks for your reply. I learn a lot from you.

You mentioned there is also a "record date", which is a couple of days after the ex-dividend date. Does that mean if my purchase transaction cannot be completed by that day, I am still not eligible for dividend? Does buying at the day prior to ex-dividend date guarantees dividend payment?

Many thanks.

It's the purchase date that counts & it will be stated on the contract if its ex div. Regardless of any delay you will get what you paid for, except if the company cancels the dividend as it's not able to pay being virtually insolvent. It happened to me many years ago with a company Park Foods Group who made ice cream.

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Though it normally makes no differences anyway as if you buy after the XD you pay less (by the amount of the dividend). Given the time value of the cash to be paid/rebated few months later, it is actually better to buy XD.

The amount of the drop may of course vary, just as share prices vary from day to day.

To work out what's best, you also need to consider tax. If buying tax-protected shares (in a pension or ISA, or where special tax rules apply) you're fine. Outside that, capital gains are better than dividends 'cos the latter are taxable income: indeed, you might in principle make gains by selling a share immediately before ex-div and buying back after.

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However, transaction costs also play a part in addition to the pure hassle of selling/buying on certain dates. Will it be worth it for a small investor in a company that pays half-yearly or quarterly dividends? Also makes the tax return compilation more complicated.

I'd prefer to invest the time in researching the actual companies I buy/sell than trying to time buys/sells for small tax savings. That being said, it's worth knowing about.

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  • 246 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
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      • up 5%



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