Saturday, April 12, 2014

Important Dates To Note When Buying Dividend Stocks PLUS Bonus Observation

Dividend Stocks
One of the most passive element (in terms of income stream) of investing in stocks is the dividend payment. Hence, it is important to understand whether the stocks that you are about to invest has a consistent and reasonable dividend payment history (most blue chips stocks are dividend stocks).

For the newbies, when come to investing in dividend stocks, there are a few key dates that you need to get familiar with. On top of that, there are a few terms or abbreviation related to dividend that should know. This post is aim to address these fundamentals.

The Important Dates For Dividend Stocks

Declaration Date:
The Date the company declares the upcoming dividend to be paid

Ex-Date (Ex-Dividend Date):
-- The Date whereby the stock is transacted without dividend. In short, if you buy the stock on this date, you are not entitled to the upcoming dividend;
-- It is reflected as "XD" in the Remarks column of the counter.

Date Of Record:
-- The date the company record the shareholders to receive the dividend;
-- It is usually the third working day from "Ex-Date".

Date Of Payment:
-- The date the company actually paying out the dividend.
-- It is usually 2 weeks after the "Date Of Record"

The Important Terms/Abbreviation For Dividend Stocks

-- Cum-Dividend indicator, means that when you are transacting the counter with this indicator, you will be entitled to the up-coming dividend

-- Exclude-Dividend indicator, means that when you are transacting the counter with this indicator, you will NOT be entitled to the up-coming dividend

Dividend Yield:
-- Measurement of the dividend profit against the market stock price (do not take into consideration of any charges/commission to receive your profit)
-- It is reflected in percentage.

-- For example, if the declared dividend is 50 cents and the stock price is 12 dollars, the Dividend Yield is 4% (0.5/12)

My Observation

1. Stock prices will drop On the "Ex-Date" onwards which is common since the stock prices is adjusting to reflect the reduced working capital. However, the reduction could be smaller or bigger than the dividend declared.

2. For Growth and Value Stocks, the stock price will recovered by the third week onwards (this is only my humble observation and I cannot proof it with any technical analysis etc..).


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