Author Topic: Question about dividends  (Read 2706 times)

Dora the Homebody

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Question about dividends
« on: April 02, 2017, 03:25:13 PM »
For stocks or mutual funds that pay dividends (for example, yearly in December), does it matter if you have owned your shares the entire year or not?  Like if you bought all your shares in November would you get the same dividends you would get if you owned those same shares for the last year (or two, or ten)?

Thanks in advance.

frugal_c

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Re: Question about dividends
« Reply #1 on: April 02, 2017, 03:29:08 PM »
I have never known of anything like that.  You can buy the day before the dividend date (which is a week or two before it is actually paid usually) and you will get the full dividend.

samuck

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Re: Question about dividends
« Reply #2 on: April 02, 2017, 03:30:43 PM »
If you own it on the ex dividend date, the dividend is yours - that is all that matters: https://en.m.wikipedia.org/wiki/Ex-dividend_date

Ursus Major

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Re: Question about dividends
« Reply #3 on: April 02, 2017, 04:23:10 PM »
If you own it on the ex dividend date, the dividend is yours - that is all that matters: https://en.m.wikipedia.org/wiki/Ex-dividend_date

Actually as far as I know you have to own it the day BEFORE the ex-divided date to be entitled to the dividend.

Dora the Homebody

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Re: Question about dividends
« Reply #4 on: April 02, 2017, 04:28:31 PM »
Ok thank you for that information.  So really, there is no "hurry" to invest any extra money early in the year if the funds you are buying in to pay dividends in December.  You're not earning any interest or anything.

Would it be better then, to invest in short-term certificates for most of the year to earn a little bit of interest and then put it into shares before dividends are paid?  Wouldn't you get the best of both that way?

Al1961

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Re: Question about dividends
« Reply #5 on: April 02, 2017, 04:41:57 PM »
It's kind of irrelevant.

Mutual funds are valued based on their net asset value. the NAV drops by the amount of the dividend on the date that the dividend is paid. If you wait to buy, you're just "buying the dividend" in your purchase cost.

Potentially, you have given up capital gains (or capital losses) while waiting to invest.

Telecaster

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Re: Question about dividends
« Reply #6 on: April 02, 2017, 04:45:46 PM »
Ok thank you for that information.  So really, there is no "hurry" to invest any extra money early in the year if the funds you are buying in to pay dividends in December.  You're not earning any interest or anything.

Would it be better then, to invest in short-term certificates for most of the year to earn a little bit of interest and then put it into shares before dividends are paid?  Wouldn't you get the best of both that way?

Unlikely.  The share price drops after the dividend is paid.

Dora the Homebody

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Re: Question about dividends
« Reply #7 on: April 02, 2017, 06:13:25 PM »
It's kind of irrelevant.

Mutual funds are valued based on their net asset value. the NAV drops by the amount of the dividend on the date that the dividend is paid. If you wait to buy, you're just "buying the dividend" in your purchase cost.

Potentially, you have given up capital gains (or capital losses) while waiting to invest.

Could you please elaborate on that part I bolded? 

Telecaster

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Re: Question about dividends
« Reply #8 on: April 02, 2017, 07:34:02 PM »
The stock price could go up while you are sitting on the sidelines.  We all know that stock prices do strange things, but they mostly go up over time.  If you mostly sit on the sidelines like you suggest, then you would mostly miss out on the increase in prices.


Al1961

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Re: Question about dividends
« Reply #9 on: April 02, 2017, 07:43:49 PM »
Quote from: Dora the Homebody
Could you please elaborate on that part I bolded?


The stock price could go up while you are sitting on the sidelines.  We all know that stock prices do strange things, but they mostly go up over time.  If you mostly sit on the sidelines like you suggest, then you would mostly miss out on the increase in prices.

What he said.

I get the impression that you are fairly new to investing. If so, this https://www.bogleheads.org/wiki/Getting_started is an excellent resource that will answer many questions, or maybe cause you to have more questions.

Dora the Homebody

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Re: Question about dividends
« Reply #10 on: April 03, 2017, 06:15:04 AM »
Thank you to everyone who is helping me along the way - I have a lot to learn still!  I appreciate it :)

Al1961

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Re: Question about dividends
« Reply #11 on: April 03, 2017, 09:45:35 AM »
William Bernstein is a well respected author about investing and retirement savings, as well as being a successful financial advisor. He has written a useful booklet on retirement savings for millennials. It's a starting place, and a road map for learning about investing. It also has an extensive list of recommended reading resources.

It's not necessarily geared towards ER - the difference with conventional retirement is really in the savings rate vs. compounding period trade-off, but the concepts are applicable to all timelines.

The .pdf is available here:
https://www.google.ca/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0ahUKEwjsgJjmzYjTAhWDz4MKHTlpAmYQFggcMAA&url=https%3A%2F%2Fwww.etf.com%2Fdocs%2FIfYouCan.pdf&usg=AFQjCNEgpHfVPx0v9LQAMJCm8ds9gLYkmg&sig2=JrhyMcaiZwjPjBDQqkj83w&cad=rja

Dora the Homebody

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Re: Question about dividends
« Reply #12 on: April 04, 2017, 05:24:22 AM »
I'm half-way through The Millionaire Next Door ;)

uwp

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Re: Question about dividends
« Reply #13 on: April 04, 2017, 02:57:13 PM »
Another thing to keep in mind when buying mutual funds (in a taxable account) right before they have distributions, is that those distributions can be taxable.

So you buy $10,000 of Mutual Fund A on Dec 10th, they pay a year end distribution on Dec 11th of 3%, you just got back $300 in dividends/capital gains that is taxable (depending on your bracket).