# Timing purchase/sale of dividend paying stocks



## johnnoandy (Sep 4, 2014)

Hi, I'm considering getting into Dividend investing for the first time. Lots of info online about payout dates, processes etc., but nothing I can find specific to purchase and sale within the same payout period. 

As an example, stock XYZ has a quarterly dividend payout schedule, with the next one occurring November 30, 2020. If I purchase and sell all of that that stock on Sep 30 and Oct 30 respectively, will I be eligible for any kind of payout on Nov 30?

I think the answer is 'no' but I guess there could be some kind of prorated interest for 1 of the 3 months, similar to a savings account.

This may be a dumb question, but something I'm having a hard time getting my head around...


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## Beaver101 (Nov 14, 2011)

^ Just keep it simple here - you have to "own" the shares *PRIOR to the ex-dividend date* as declared by the stock company. 

E.g. (quarterly) ex-dividend date is Sept. 1, you still own 100 shares on Aug. 31, then you get the dividend that's payable on Nov. 30 (using your example) for those # of shares. If you sold any shares (say 50) prior to or even on Sept. 1, then you would only get dividends based on 50 shares left over. 

If you sold "all" your shares prior or on Sep. 1, then you get no dividends even for the 2 months that you owned/held them. Ie. no pro-rata.


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## like_to_retire (Oct 9, 2016)

It's fairly simple, you have to know the Ex-Dividend date and the Record date for the stock in question. This can be found at the company's web site under Investor Relations.

Since we've moved to a two day settlement, you'll usually find the schedule works out like this:

Business day 1. Buy the stock here to be "on record" by the 3rd day (Record Date)
Business day 2. Ex-Dividend date - the value of the stock drops by the worth of the dividend paid out.
Business day 3. Record date
............. many days pass
Business day X . Pay date for dividend.

So as long as you have bought the stock online by day 1, then you'll be on record as owning the stock on the Record Date and so you will get the dividend paid to you on the Dividend Pay date.
And no, there's no pro-rated dividends. You either own it on the Record Date and get it - or not.

ltr


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## johnnoandy (Sep 4, 2014)

Awesome thanks guys for the quick response. There must be a lot of people pile in right before that ex-dividend date.


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## Topo (Aug 31, 2019)

The dividend on stocks and ETFs is not prorated. Whoever owns the shares on the close of the day before the ex-dividend date will get all the dividends. 

In the case of XYZ, if an ex-dividend date occurs between Oct 1 and Oct 30 you will receive the dividends after a few days.


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## Beaver101 (Nov 14, 2011)

^^ (post 4) You could say that with newbees people as they don't realize / grasp what LTR was saying:

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Business day 2. Ex-Dividend date - *the value of the stock drops by the worth of the dividend paid out.*

Click to expand...

_


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## johnnoandy (Sep 4, 2014)

If I'm only investing for the dividends then, and not expecting much in way of returns, there's really no value to investing prior to ex-dividend date is there? Similarly, other than trading costs, no reason not to sell immediately after payout. I may be missing something here, sounds too wonky.


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## james4beach (Nov 15, 2012)

(Nobody understands that the price drops by the dividend payout)

Yes the ex dividend is important, you have to buy before that date to get the dividend. But in the bigger picture, it *doesn't matter* when you buy the dividend stock. The reason it doesn't matter is that the dividend isn't free money. If you buy before the ex date, then you'll get the dividend but the share price will drop accordingly. If you buy after the ex date, you won't get the dividend but you will get to buy at a lower price. So in the big scheme of things, it doesn't matter when you buy.

The more important part is to focus on proper stock-picking, because by being a "dividend investor" you are choosing to pick individual stocks. This is very hard to do. So I would focus the energy on properly picking stocks, making sure they are good quality stocks in different sectors. Then don't worry too much about dividend timing.

Some good dividend stocks in my opinion are: RY, TD, ENB, TRP, CNR, BCE, T, FTS, EMA


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## james4beach (Nov 15, 2012)

johnnoandy said:


> If I'm only investing for the dividends then, and not expecting much in way of returns, there's really no value to investing prior to ex-dividend date is there? Similarly, other than trading costs, no reason not to sell immediately after payout. I may be missing something here, sounds too wonky.


Why would you sell? The point of dividend investing is to create a basket of equities which regularly pay nice dividends.

Like I said in the last post, it doesn't really matter when you buy. Focus on good equity selection and build up your portfolio. Don't worry about timing of when you do the purchasing; these should be long term positions.


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## Beaver101 (Nov 14, 2011)

^ (Re post 7) Keep in mind the stock price doesn't continue to stay depressed. Dividend investing is popular because it's one mean of producing income/cash flow and is done for the long-term by investors. What you've expressed is short-term trading dividend stocks in which case kind of defeat investing in dividends-paying stocks.

J4B nicely explains the concept of dividend investing also.


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## dubmac (Jan 9, 2011)

^ that's what I was gonna say!
What you are trying to do is to time the market - only you plan to time the market based on ex-dividend dates. Before you do this, I will suggest that you back-test the strategy. Try taking all of the stock prices for a given stock (RY for example), and calculate to cost of investing say 200 shares (which should be in the 20K range) on a date before the stock goes ex-dividend, and the price you expect to recover when you sell the stock a few days later. And you would add the expected dividend payment - which would be in the 218 range. I would be interested to see the results from the exercise - whether you would make, or lose money over the duration of a year.

I should add that you would also need to factor in the trading costs of getting in and out on dates that you buy and then sell. A negligible amount, but still, likely in the 20 range.


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## james4beach (Nov 15, 2012)

james4beach said:


> Some good dividend stocks in my opinion are: RY, TD, ENB, TRP, CNR, BCE, T, FTS, EMA


By the way, here are the stats on this portfolio. To find these I just looked at XIU holdings and grabbed some of the largest dividend payers out of it, by the way.

Performance history and graphs are shown here
Dividend yield: 4.8%
23 year performance: 13.5% annualized

In my opinion something like this would be a solid portfolio. It would probably perform at least as well as the TSX index (possibly better) and has a huge 4.8% yield. You could just buy into these positions over time, leave the stocks alone and keep getting the dividends. Might need to do some maintenance every couple years.

Another alternative is to buy CDZ which holds & manages a good quality portfolio, and pays around 5% yield as well. That's the easier route.


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## like_to_retire (Oct 9, 2016)

johnnoandy said:


> If I'm only investing for the dividends then, and not expecting much in way of returns, there's really no value to investing prior to ex-dividend date is there? Similarly, other than trading costs, no reason not to sell immediately after payout. I may be missing something here, sounds too wonky.


Many have tried, and all have failed.

Stop trying to "game" ex-dividend behavior, as it doesn't work.

I showed you the dates required to get a dividend. If your intention is to make an extra dollar on the transaction, forget it. 

Generally, dividends are a great way for the retired to control their cash flow without having to sell stocks, especially during pull-backs. For those in accumulation years, they have to find a productive home for the cash that's thrown off and it may be a challenge.

ltr


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## james4beach (Nov 15, 2012)

like_to_retire said:


> Many have tried, and all have failed.
> 
> Stop trying to "game" ex-dividend behavior, as it doesn't work.
> 
> ...


I agree. Don't play around with the ex-dividend date, there's no point.

Dividend streams are very useful for retirees. If you're still working and accumulating, then it's a different story.


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## johnnoandy (Sep 4, 2014)

Thanks all... I appreciate the feedback. All points make sense.


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## londoncalling (Sep 17, 2011)

james4beach said:


> I agree. Don't play around with the ex-dividend date, there's no point.
> 
> Dividend streams are very useful for retirees. If you're still working and accumulating, then it's a different story.


I agree with the others here that playing the ex div date game is pointless. That being said I do watch a stocks price movements in comparison to its peers and the general market leading up to earnings releases. 

Dividend streams are also useful to investors that to investors that prefer to rebalance or reallocate as opposed to utilizing a DRIP. Yes it is Total Return that matters most in accumulation phase. However, IMO dividend payers remove some of the temptation to time stock selling.


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## junior minor (Jun 5, 2019)

Thanks to beaver, james4beach and like_to_retire for wise words as usual. 

I recently did start to develop an interest in that, considering it might not be super nice for day trade, but at least it's usually stable for a DRIP ( Dividend ReInvestment Plan) and I would suggest you look at this article.









Canadian stock market: DRIPs and their pros and cons


DRIPs, Dividend reinvestment plans, are plans companies offer to allow shareholders to receive additional shares in lieu of cash dividends.




www.tsinetwork.ca





As told in the above article, even if from 2011, often updated, ''avoid the ones in the limelight'' because, well, you get the idea.I'm looking at this on a regular basis to get the good stuff that's not mentioned elsewhere. Compare any of these in there








Dividend.com







www.dividend.com




with whatever is being promoted by big media. I was telling this admin student the other day'' well, I'd rather buy far more stocks that are going to yield a juicy dividend on a monthly basis, rather than a big one that's just going to slowly move around and give nothing'' . Of course, I could be wrong, but usually, if experts mention it...


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## MrMatt (Dec 21, 2011)

Just to pile on, professionals & institutions pile onto all these potential arbitrage opportunities.
As an individual investor, it's likely not worth the trouble.


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