# Dividend Confusion



## jrsaballa (Nov 22, 2015)

Would like to know what the confusion about dividends are about,

the way I see it, you just need to own the stock one day before the ex-dividend day and then you get the dividends

Any problems with this?


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## jerryhung (Mar 28, 2011)

nothing is free

all else being equal, stock will go down by the same amount on ex-div date


Google to learn more


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## tkirk62 (Jul 1, 2015)

You only get one dividend for owning on the ex-dividend date. Then in three months there will be another ex-dividend date and you need to own the stock on that day to get one more dividend.

This is where your confusion lies.

1) You buy a stock on January 13th (for example). The ex date is January 15th, you own the stock on the 15th so you are now entitled to the January dividend (let's say it got paid on the 29th). 

2) You sell the stock on the 16th. You still get your January dividend on the 29th. But now there is another ex-dividend date on April 15th. You need to own the stock on April 15th to be entitled to the April dividend.
*
EACH EX-DIVIDEND DATE ENTITLES YOU TO 1 DIVIDEND. TO RECEIVE DIVIDENDS FOR AN ENTIRE YEAR YOU NEED TO OWN THE STOCK ON EVERY EX-DIVIDEND DATE*

Own a stock for a year and you'll get a year's worth of dividends. One a stock for a day or a month and the best you can hope for is one dividend.

Hope that clears this up once and for all.


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## mordko (Jan 23, 2016)

Is someone trying to buy a stock for a day just for the dividend? That's a sure way to lose money fast. Isn't it kind of obvious?


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## jrsaballa (Nov 22, 2015)

Yeah I can't agree with you two, I believe you own the stock before the ex-dividend day and that entitles you to the dividend yield's worth over a year.

You can't keep owning the same stock because prices drop after or on ex-dividend day.


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## jrsaballa (Nov 22, 2015)

*Dividends, what if?*

What if your investments never paid at all, what are your options?


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## tkirk62 (Jul 1, 2015)

It really doesn't matter who you agree with or what you believe because you are wrong. Countless people have told you the correct information which contradicts what you believe but you keep your head in the sand. Your belief is incorrect and that is why you haven't received the dividends you expect and why nobody agrees with you. The below comes from dividend.com but the emphasis is mine:

"A dividend-paying stock’s ex-dividend date, or ex-date, is very important to investors. In a nutshell, if you buy a dividend stock before the ex-dividend date, then you will receive the *next upcoming* dividend payment. If you purchase the stock on or after the ex-dividend date, you will not receive the dividend."

If you are misinformed or simply a novice then I apologize for the harsh tone. But if you are being ignorant (as I believe) realize that if you are saying something different than everybody else maybe you should look into what they're saying.


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## AltaRed (Jun 8, 2009)

jrsaballa said:


> Yeah I can't agree with you two, I believe you own the stock before the ex-dividend day and that entitles you to the dividend yield's worth over a year.
> 
> You can't keep owning the same stock because prices drop after or on ex-dividend day.


First point: To repeat it yet again. You are wrong. You are only entitled to that one specific dividend payment if you own the stock one day before ex-dividend day. If you subsequently sell the stock, no more dividends thereafter ever.

Second point: Companies keep earning income every day. While it is theoretically true, the stock should drop by the amount of dividend right after dividend day, it seldom does BECAUSE value is in the eyes of the beholder and stockholders do not precisely measure company worth on a daily basis. By the time the next dividend day comes, the company will have again earned income (or more) to pay the dividend yet again and perhaps even share growth too.


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## mordko (Jan 23, 2016)

jrsaballa said:


> Yeah I can't agree with you two, I believe you own the stock before the ex-dividend day and that entitles you to the dividend yield's worth over a year.
> 
> You can't keep owning the same stock because prices drop after or on ex-dividend day.


You opened my eyes. There is a sure way of making huge amounts of money with no effort whatsoever that nobody else has discovered except for the readers of this thread thanks to your insights. 

Here is how it works: I buy TD shares just before the ex-dividend date and sell it after. I get ~4% years' worth of dividends (paid quarterly). Transaction may cost me 1%. On ex-dividend date shares drop by the value of quarterly dividend (1%). Voila! I made 2%. A fool-proof way to make easy money. Always works.


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## My Own Advisor (Sep 24, 2012)

Then you just focus on total return. Say, owning a stock like BRK.A.

"That $1,000 invested in 1964, when Buffett took over the company and shares cost just $19, would be worth about $11.6 million dollars today, based on the last available closing price of $221,180 on February 27. $1,000 invested in 1990 would be worth $33,136 today."

http://www.businessinsider.com/warren-buffett-berkshire-hathaway-historical-returns-2015-3


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## jrsaballa (Nov 22, 2015)

YOU NEED TO READ WHAT YOU JUST QUOTED.

I am not talking about the next upcoming dividend payment. I am talking about previous payments.


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## jrsaballa (Nov 22, 2015)

YOU CANNOT KEEP OWNING THE SAME STOCK WITH THE SAME AMOUNT OF MONEY BECAUSE OF WHAT HAPPENS AFTER EX-DIVIDEND DAY.

It's like you've never traded dividend stocks before. Have you? How many times?


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## Beaver101 (Nov 14, 2011)

^ *



mordko:

Click to expand...

* What did you drink this morning? vodka? whiskey? koolaid?


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## jrsaballa (Nov 22, 2015)

Beaver101 said:


> ^ What did you drink this morning? vodka? whiskey? koolaid?


all of above


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## tkirk62 (Jul 1, 2015)

Nope. Life's too short, good luck in the future jrsaballa. I wish you the best in your continuing investing education


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## treva84 (Dec 9, 2014)

jrsaballa said:


> YOU CANNOT KEEP OWNING THE SAME STOCK WITH THE SAME AMOUNT OF MONEY BECAUSE OF WHAT HAPPENS AFTER EX-DIVIDEND DAY.
> 
> It's like you've never traded dividend stocks before. Have you? How many times?


Hey did you have any luck with your dividends yet? The business quarter is over - did they come through? Maybe your broker stole them from you?


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## mordko (Jan 23, 2016)

Beaver101 said:


> ^ What did you drink this morning? vodka? whiskey? koolaid?


I just figured we are still in a celebratory mode.


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## Numbersman61 (Jan 26, 2015)

mordko said:


> I just figured we are still in a celebratory mode.


I assume he's happy because he just paid his taxes on his phantom divided income


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## mordko (Jan 23, 2016)

Numbersman61 said:


> I assume he's happy because he just paid his taxes on his phantom divided income


Or is he making April 1st last a bit longer? Like... This cannot possibly be serious?


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## mordko (Jan 23, 2016)

jrsaballa said:


> YOU NEED TO READ WHAT YOU JUST QUOTED.
> 
> I am not talking about the next upcoming dividend payment. I am talking about previous payments.


Got it. Let's not talk about unicorns, let's talk about fairies instead. Makes all the difference in the world.


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## slacker (Mar 8, 2010)

jrsaballa said:


> Would like to know what the confusion about dividends are about,
> 
> the way I see it, you just need to own the stock one day before the ex-dividend day and then you get the dividends
> 
> Any problems with this?


My dividends are working great. I get them every month with no problems ever.


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## Eclectic12 (Oct 20, 2010)

jrsaballa said:


> Yeah I can't agree with you two, I believe you own the stock before the ex-dividend day and that entitles you to the dividend yield's worth over a year.


Whether you agree or not, my 20+ years of experience owning & watching dividend paying stock says to get a years worth of dividends, one must own the stock on the entire year's worth of ex-dividend dates. My uncle'so experience for another 30+ years is the same.

For my quarterly dividend paying stock, that is four days a year. For my monthly paying ones, twelve dates a year.




jrsaballa;1092074 said:


> ...You can't keep owning the same stock because prices drop after or on ex-dividend day.


Why not?
Sure it starts trading lower but where investors keep demand going as the business keeps going, the share price will rise by more than the dividend payment.


Last I checked, a dividend payor that I bought 16 or so years ago has not only paid the dividends, it has split at least twice. It is currently sitting at +600%, before adding in the return the dividends paid.

Compared to my co-worker who sold then re bought at the wrong time (i.e. sold low, bought higher), holding through the dividend payments does not seem to have hurt at all.


Cheers


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## jaybee (Nov 28, 2014)

He's back! His threads are so entertaining!


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## Eclectic12 (Oct 20, 2010)

tkirk62 said:


> You only get one dividend for owning on the ex-dividend date. Then in three months there will be another ex-dividend date and you need to own the stock on that day to get one more dividend...


+1 ... which matchs what is on years of broker statements.

The one wrinkle I would add is that I own some monthly dividend paying stock. More frequent dividend payments means more ex-dividend dates (i.e. 12).

I believe quarterly dividends are still more common than monthly.


Cheers


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## Eclectic12 (Oct 20, 2010)

jrsaballa said:


> YOU CANNOT KEEP OWNING THE SAME STOCK WITH THE SAME AM dOUNT OF MONEY BECAUSE OF WHAT HAPPENS AFTER EX-DIVIDEND DAY.


The challenge with trading is to be sure to sell high & buy lower. For some of my dividend paying stock, I would have to skip six or more dividends to be buying lower.

If you can do it successfully, go for it.

In the meantime, since I have limited time/access, I prefer to buy and hold unless the business prospects or market has changed.


As I say, I have some that I am holding for 10+ and 16 years. Others I have held for 3 years and others I held for 5 days. I have yet to decide to sell based on when the dividend was paid where Norte or mid-2008 I sold based on the company or market forces.


Cheers


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## Retired Peasant (Apr 22, 2013)

I think your confusion lies in how dividend yield is reported (and perceived by you). It's reported as a yearly figure eg. 4% - and you would get that if you held the stock for the entire year, through all the dividend payment dates (technically the 4% varies, but assume it doesn't). If you don't own the stock for the full year, then you won't get the full 4%.

Think about a high interest savings account. They tell you it pays 3% - that means 3% annually. But if you only have the account for 3 months, you'll only get 1/4 of the annual 3%. You won't get a full 3% on your $$.


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## jrsaballa (Nov 22, 2015)

Is there anything stopping me from buying a stock and then holding it for a year?


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## lightcycle (Mar 24, 2012)

jrsaballa said:


> Is there anything stopping me from buying a stock and then holding it for a year?


I wouldn't advise it. It's illegal and you could go to jail if the CDIC discovers it.

This is all just crazy talk. Just sell the stock before the ex-dividend date like everyone else does.


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## Eclectic12 (Oct 20, 2010)

jrsaballa said:


> Is there anything stopping me from buying a stock and then holding it for a year?


No ... some here have posted owing a particular stock for thirty years ... (I am only at about eighteen years myself).

Typically the reasons to keep holding are that the business prospects for future business are good.

Similarly, the reasons to sell are that:
a) business prospects are bad
b) the investor thinks there's another company that has better prospects
c) the investor needs more money than the income is producing.
d) the company is making bad moves or going under
e) the market is dropping across the board where the investor want to keep most of the gains


Cheers


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## TomB19 (Sep 24, 2015)

mordko said:


> You opened my eyes. There is a sure way of making huge amounts of money with no effort whatsoever that nobody else has discovered except for the readers of this thread thanks to your insights.


I remember when I used to work for a living. I'd wake up and race to get to work on time, only to experience eight hours of stress and other people telling me what to do. That was before I discovered the cushy, carefree, lifestyle that comes with virtual distributions.

My life is unrecognizable, now. Cars, broads, and all the Kraft dinner I can eat.

I'm in the process of writing a book that will share this secret with the world. It will be called, "Life with VD". Shortly after publication, I will go on tour, presenting seminars that will teach people to get their own VD.


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## TomB19 (Sep 24, 2015)

Eclectic12 said:


> Typically the reasons to keep holding are that the business prospects for future business are good.


Other than distributions and the possibility of an equity gain, I don't see much upside to owning stock.


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## Eclectic12 (Oct 20, 2010)

^^^^

Future business being good likely translates to be bigger distributions/bigger equity gains so I suspect we are talking about the same thing.

On a broader scale, where it is taxable - I'd rather be making the $$ as an equity gain versus employment/interest due to the tax benefits.


Cheers


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## jrsaballa (Nov 22, 2015)

Thank you all for your help

I will now buy and hold stocks that pay monthly, anyone see anything wrong with this?


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## TomB19 (Sep 24, 2015)

Until you can get a handle on how your money flows and grows, it will be tough to know how to design your portfolio. I recommend you study it. Build a spreadsheet to track and predict gains and cash flow.

I have a locked-in account that contains a single stock that will not distribute in the next decade, if ever. Zero cash flow, other than the $0.03 I make each month in interest from the tiny amount of cash sitting there.

In another account, I have an RRSP mortgage, two utilities, and a bunch of distributing equities including REITs. This account is a cash monster and is far more work to manage because I have to manage the cash flow.

You sound like someone who is trying to build cash flow. That will tend to steer you in a specific direction.

You could easily bulk up on REITs for tremendous cash flow but that may be a bit short sighted, as you will have the risk of a non-diversified portfolio. Also, I've never heard of a strong distributor making equity gains in the same league as a good momentum growth stock.

There is no credible soundbite technique to investing, that I've ever found. If you break open Excel and spend several thousand hours examining various scenarios over the next several years, you will probably have a pretty solid idea of what you need to do. In the mean time, you could do worse than buying stocks with solid distributions.

I don't see anything wrong with holding stocks that pay monthly. I choose to look at it as those stocks buying back the initial risk over time.

You sound young and eager. These are both excellent attributes. Learn to turn off your gut. Make the pursuit of objectivity your passion and start running numbers and projecting different scenarios to see how it will look at various points in the future.

I used to spend two hours Saturday morning (it usually turned into 4) working with a spreadsheet to speculate and project all sorts of things including Real Estate, stocks, GIC ladders, etc. What would happen if the economy shut down like it did in the US in 2008? Your stocks will tank, your real estate will be unsellable, and you are likely to lose your job. Do you have a plan to survive that? What will you do if inflation gets out of control, as can happen when government debt gets out of hand? How will that affect you?

Actually, you don't have to understand all that much about the financial world. With a disaster survival plan and a couple of good ideas, you can go far. From there, you grow your ideas by reading and studying. It's a life long commitment.


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