Dividend Dates

by Mike Holman

I’ve been doing some research into dividends for a project I’m working on – I thought the various dividend dates would make an interesting post for anyone who owns dividend paying securities – either stocks or mutual funds.

Dividend dates are the relevant dates surrounding the dividend payments. These are important to know because if you own a stock or mutual fund that pays a dividend, the owner of the security on the day the dividend is paid is not necessarily the person who gets the dividend.

Payment date – this is the date that the company actually pays the dividend to shareholders who are eligible.

Record date – any shareholders as of this date will get the most recent dividend. If you are buying a mutual fund and want to avoid getting the next dividend then wait until after the record date to buy it. If you are selling a mutual fund and want to avoid the dividend then sell it before the record date.

Ex-dividend date – this is two business days before the record date – someone who buys the stock on
this date or later will not get the dividend.

Most companies have this information on their investor relations web page. For any particular stock or mutual fund, just go to the main website of that company and look for “investor relations”.

Why is this boring information important?

Mutual funds can sometimes pay large dividends at year end. With mutual funds, the unit price goes down by the amount of the dividend so when a dividend is paid, you don’t have any more money in the account. The problem with buying a mutual fund just before it pays a dividend in a taxable account is that you will get nailed with taxes which is not a good thing. This post covers a mistake that Moolanomy made when he bought a mutual fund just before it paid a big year end dividend. In his case, it wasn’t lack of knowledge of the dividend dates that caused the problem but his situation does illustrate why it’s important to know the dividend date details.

Let’s look at an example!

Bank of Montreal (BMO) – if you look at the investor relations dividend page, then you can see that the August dividend will be paid on August 25 and the record date is August 1. The ex-dividend day will be July 30 so if you buy the stock on July 30 or after then you won’t get any dividend. If you own the stock and sell it on July 30 or July 31 then you will still get the dividend. The reason for this is because of the 3 (business) day settlement period. You don’t really own the security for the purposes of the dividend until the trade settles on T+3 so for example if you buy a security on Aug 25 then you don’t really ‘own’ it until Aug 28 and will only get dividends if the record date is Aug 28 or after.

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