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n00b question: Can I buy a stock a day before dividends issue and get my dividend?
- Thread starter jay42
- Start date
Is it really a wash? I see reports along the lines of "Company XYZ" issued a 68 cents per share dividend today. Now if I had 1000 shares, I just got a $680 paycheck.
In that case, are you saying the company stock would suddenly drop by 68 cents a share the next day before I can even sell it off?
In that case, are you saying the company stock would suddenly drop by 68 cents a share the next day before I can even sell it off?
Yes, essentially that is the case. The stock price doesn't drop on the announcement day though, but on ex-dividend date and the latest you have to buy the stock to receive the dividend is the day before the ex-dividend.
Now, since the stock price is affected by many different factors the stock may not drop by exactly the amount of the dividend, but still it is a wash. E.g. the stock can open unchanged, but all it really means is that it actually opened higher by the amount of the dividend.
Now, since the stock price is affected by many different factors the stock may not drop by exactly the amount of the dividend, but still it is a wash. E.g. the stock can open unchanged, but all it really means is that it actually opened higher by the amount of the dividend.
Quote from jay42:
Interesting.
I was hoping to get into some dividend-declaring real estate stuff, which didn't seem to drop in value upon dividend declaration.
But if you all seem to think it's a wash, I suppose it is.
Jay,
I'm not sure if you actually mean the date the dividend is announced/declared or the ex-dividend date, since you keep using the terms "dividend-declaring stocks" and "upon dividend declaration", but the stock price is affected on the ex-dividend date. The announcement date has absolutely no relevance!
The reason that it is a wash is because the company reduces the amount of cash it has, hence the value of the company/stock drops by the amount of the payout. You either hold a stock at price X, or a dividend Y and a stock at price X-Y.
Off the top of my head, these are the points you need to consider.
You need to hold the stock by the "record date" to get the dividend. This day is usually 1 day BEFORE "ex-dividend" date.
So if a company "announces" a dividend, that doesn't mean you get the dividend and then sell the stock at the same price you bought it. It means you HAVE to own it on a certain day, and the following day the stock is GUARANTEED to drop by the amount of the dividend (+ or - market fluctuation) the next day.
Some people like to buy into the dividend, but a quick and easy profit is not the reason. The opportunity doesn't exist in this example.
You need to hold the stock by the "record date" to get the dividend. This day is usually 1 day BEFORE "ex-dividend" date.
So if a company "announces" a dividend, that doesn't mean you get the dividend and then sell the stock at the same price you bought it. It means you HAVE to own it on a certain day, and the following day the stock is GUARANTEED to drop by the amount of the dividend (+ or - market fluctuation) the next day.
Some people like to buy into the dividend, but a quick and easy profit is not the reason. The opportunity doesn't exist in this example.
Quote from jay42:
I see reports along the lines of "Company XYZ" issued a 68 cents per share dividend today. Now if I had 1000 shares, I just got a $680 paycheck.
In that case, are you saying the company stock would suddenly drop by 68 cents a share the next day before I can even sell it off?
I guess there really is one born every minute.