What You Must Know About a Stock's Dividend Date

(Image credit: IPGGutenbergUKLtd)

In today’s low-interest-rate environment, investors can’t seem to get enough high-yielding dividend stocks. But pay close attention to a company’s payment schedule. Otherwise, you could miss out on collecting a dividend you believe you’re entitled to.

6 Good Dividend Stocks Yielding 5% or More

The critical deadline to mark on your calendar is a firm’s “ex-dividend” date (available on websites such as Yahoo Finance and in the investor-relations section of a company’s website). If you own shares before that date, you’ll lock in the next payment. But investors who buy on or just after the ex-date give up the rights to the next dividend payment.

To see how this works, consider General Electric’s payment schedule. The company announced on June 10 that it would pay a dividend on July 25 to shareholders “of record” as of June 20. To be eligible for the dividend, investors had to own shares before the stock’s ex-dividend date of June 16. The ex-date always lands two business days before the record date. In this case, the record date fell on a Monday, which pushed the ex-date back to Thursday, June 16. Buying GE anytime before the market closed on June 15, even in the final second of trading, would entitle you to its next dividend.

From just $107.88 $24.99 for Kiplinger Personal Finance

Become a smarter, better informed investor. Subscribe from just ~~$107.88~~ $24.99, plus get up to 4 Special Issues

CLICK FOR FREE ISSUE

https://cdn.mos.cms.futurecdn.net/flexiimages/y99mlvgqmn1763972420.png

Sign up for Kiplinger’s Free Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

Purchasing the stock on or just after the ex-date would disqualify you from the payment. That can sting, especially if it’s a high-yielding stock, such as an electric utility or a telecom company. Many of these stocks yield more than 4%, so missing a payment could leave a hefty amount of income on the table. Moreover, companies often make their dividend payment several weeks after the ex-date. That’s also a danger zone because buying shares at any point in that stretch would still leave you off the company books as a “shareholder of record” entitled to receive the next dividend.

One other caveat: Be aware of how a stock can trade on the ex-date. Typically, shares open lower by roughly the amount of the upcoming dividend. Buying on that day may get you a lower price, but you will typically have to wait about three months before you collect the next disbursement.

If you’re interested in a dividend stock, first check the date of the next payment. Buy shares before the stock goes ex-dividend the next time. Also note that if you sell shares after the ex-date, you’ll still collect the upcoming payment. Either way, make sure to stay on the receiving end of the dividend income line.

Daren joined Kiplinger in July 2015 after spending more than 20 years in New York City as a business and financial writer. He spent seven years at Time magazine and joined SmartMoney in 2007, where he wrote about investing and contributed car reviews to the magazine. Daren also worked as a writer in the fund industry for Janus Capital and Fidelity Investments and has been licensed as a Series 7 securities representative.