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"Remember, to receive a dividend, you have to own the stock at the close on the day prior to the ex-dividend date."
This is incorrect. Typically, stocks settle three business days after trade ("T+3"). This means that as far as the company is concerned, you don't own the stock (you're not "on the books") until three days after you make the trade. So, if you need to be the owner of record on Thursday ("record date") to get a dividend, you must place your trade by Monday (three business days earlier). If you were to place your trade on Tuesday, the trade wouldn't "settle" until Friday, and the company would give the old owner, not you, the dividend.
That's why Tuesday is considered the "ex-date", and why you need to trade the day before the ex-date. But you own the stock two days after the ex-date.
Note - the above applies to stock trades. Mutual funds typically settle in one day (via a broker), same day (via the fund distributor), and occasionally it takes three days depending on the fund and broker. Always check to make sure you don't miss a date.
Also - the above applies to ownership for the purpose of dividends. For tax purposes, your holding period starts the day after the trade date.
Comments
This is incorrect. Typically, stocks settle three business days after trade ("T+3"). This means that as far as the company is concerned, you don't own the stock (you're not "on the books") until three days after you make the trade. So, if you need to be the owner of record on Thursday ("record date") to get a dividend, you must place your trade by Monday (three business days earlier). If you were to place your trade on Tuesday, the trade wouldn't "settle" until Friday, and the company would give the old owner, not you, the dividend.
That's why Tuesday is considered the "ex-date", and why you need to trade the day before the ex-date. But you own the stock two days after the ex-date.
Note - the above applies to stock trades. Mutual funds typically settle in one day (via a broker), same day (via the fund distributor), and occasionally it takes three days depending on the fund and broker. Always check to make sure you don't miss a date.
Also - the above applies to ownership for the purpose of dividends. For tax purposes, your holding period starts the day after the trade date.
For stock settlement date, trade date, ex-date, see, e.g. http://wiki.fool.com/Does_the_Settlement_Date_Have_to_Occur_Before_the_Ex-Dividend_Date_to_Receive_a_Dividend?
For mutual fund settlement dates, see: https://scs.fidelity.com/webxpress/help/topics/learn_trading_mutual_funds.shtml#settle
For the purpose of tax calculations, see IRS Pub 550:
http://www.irs.gov/publications/p550/ch04.html#en_US_2012_publink100010540
Regards,
Ted
Ex Dividend Date Video: http://www.investopedia.com/video/play/ex-dividend-date/
I am getting getty awaiting my forth coming November and December fund distributions.
I am expecting a good year for distributions; and, it is a good way to harvest principal by taking distributions in cash.
Skeeter