VTI dividend question

[SenoritaStache]

I have a closing for a piece of real estate this month.  I’m trying to time the sale of some VTI etf, so that I get paid the dividend and then sale after.  I’m slightly confused as to the record date and the ex date.  Can anyone explain it to me in a kid can understand kinda way?  I’d greatly appreciate it.  The dates in question are 09/22/23 record date, 09/21/23 reinvest and/or ex dividend date?  The last date I understand is the day the actual dividend gets paid out, and that date is 09/26/23 (payable date).  Thank you in advance

[secondcor521]

If you go here:

https://investor.vanguard.com/investment-products/etfs/profile/vti#distributions

And click on the column titles in the table, it will give you a definition of the terms.

Generally, and as those column titles will tell you, VTI will drop by roughly the amount of the dividend on the ex-dividend date but you have to own the shares on the record date (which appears to be 1-3 days later) in order to get the dividend.

In other words, there is no free lunch.

Also, as a general comment, you probably would rather sell the shares before the ex-dividend date rather than after the record date, because your capital gains - assuming you have held the shares long term - will be taxed better than (or in worst case as good as) than the dividend.

The reinvest date is not on the above web page.  That is probably the date at which your VTI dividend is reinvested in additional VTI shares if you have dividend reinvestment turned on.

[ATtiny85]

A case for waiting would be you would know exactly how much to sell, since the dividend payout will have some uncertainty until it is paid.

Is that the case OP?

[daverobev]

The ex date is the relevant date. On this date, you can sell the shares and get the divi.

The record date is different because it takes X days for a trade to settle. It used to be 3 days but has been shortened to 2 in many places.

So if you sell on the day before the ex-dividend date, you won't get the dividend because you won't be marked as the owner on the record date. If you sell on the ex date or after, you will be marked as owner on the record date. Easy, right?!

[secondcor521]

The ex date is the relevant date. On this date, you can sell the shares and get the divi.

The record date is different because it takes X days for a trade to settle. It used to be 3 days but has been shortened to 2 in many places.

So if you sell on the day before the ex-dividend date, you won't get the dividend because you won't be marked as the owner on the record date. If you sell on the ex date or after, you will be marked as owner on the record date. Easy, right?!

I think you have your terminology switched.

If you go to the Vanguard link I provided above for VTI, the record date is the date you have to own it to get the dividend, but for VTI the record date reliably is *after* the ex-dividend date.

I can't see any way to reconcile your post with Vanguard's link, so either I misunderstood you or one of us is mistaken.  I typically bet on it being the other person, but perhaps that is hubris on my part.

[daverobev]

The ex date is the relevant date. On this date, you can sell the shares and get the divi.

The record date is different because it takes X days for a trade to settle. It used to be 3 days but has been shortened to 2 in many places.

So if you sell on the day before the ex-dividend date, you won't get the dividend because you won't be marked as the owner on the record date. If you sell on the ex date or after, you will be marked as owner on the record date. Easy, right?!

I think you have your terminology switched.

If you go to the Vanguard link I provided above for VTI, the record date is the date you have to own it to get the dividend, but for VTI the record date reliably is *after* the ex-dividend date.

I can't see any way to reconcile your post with Vanguard's link, so either I misunderstood you or one of us is mistaken.  I typically bet on it being the other person, but perhaps that is hubris on my part.

The record date is after the ex date, always, yes. Because it takes time for the trade to settle.

Ex date is the 2nd of a month. Which means you sell on the 2nd. The trade doesn't settle until a number of days later which depends on the exchange, but let's say two. So you sell in your brokerage on the 2nd, the ex date. On the record date two days later you are still the owner because the trade hasn't settled. You are recorded as the owner, you get the dividend.

It's the same with margin. AFAIK you don't start paying a margin loan until the trade settles because you aren't technically the owner, you haven't actually borrowed the money, until the trade settles.

So - in terms of the dividend, it is the ex-dividend date that matters to you. The record date is not relevant. The only reason the ex date exists is precisely because it takes some number of days for the trade to settle.

Hopefully that's clearer.

[EvenSteven]

This is all good information, but bottom line for the OP is that it doesn’t matter. Timing your sale around dividend payments won’t net you any extra dollars.

[daverobev]

This is all good information, but bottom line for the OP is that it doesn’t matter. Timing your sale around dividend payments won’t net you any extra dollars.

Depends, in some places cap gains are taxed differently from dividends.

[Stimpy]

This is all good information, but bottom line for the OP is that it doesn’t matter. Timing your sale around dividend payments won’t net you any extra dollars.

That depends, on what the market decides, other wise you could ALWAYS point to where the dividend happened without knowledge of the ex date.   
There are a group people who have a trading strategy based around this and I have seen people make profit off it as well as loose money.  Not my cup of tea, but it was/is interesting to watch....

Me personally, IF I have to sell near that date, I try to get the dividend.  The gain or loss on the trade for the day is never enough to matter as your pulling out either way.

[secondcor521]

The ex date is the relevant date. On this date, you can sell the shares and get the divi.

The record date is different because it takes X days for a trade to settle. It used to be 3 days but has been shortened to 2 in many places.

So if you sell on the day before the ex-dividend date, you won't get the dividend because you won't be marked as the owner on the record date. If you sell on the ex date or after, you will be marked as owner on the record date. Easy, right?!

I think you have your terminology switched.

If you go to the Vanguard link I provided above for VTI, the record date is the date you have to own it to get the dividend, but for VTI the record date reliably is *after* the ex-dividend date.

I can't see any way to reconcile your post with Vanguard's link, so either I misunderstood you or one of us is mistaken.  I typically bet on it being the other person, but perhaps that is hubris on my part.

The record date is after the ex date, always, yes. Because it takes time for the trade to settle.

Ex date is the 2nd of a month. Which means you sell on the 2nd. The trade doesn't settle until a number of days later which depends on the exchange, but let's say two. So you sell in your brokerage on the 2nd, the ex date. On the record date two days later you are still the owner because the trade hasn't settled. You are recorded as the owner, you get the dividend.

It's the same with margin. AFAIK you don't start paying a margin loan until the trade settles because you aren't technically the owner, you haven't actually borrowed the money, until the trade settles.

So - in terms of the dividend, it is the ex-dividend date that matters to you. The record date is not relevant. The only reason the ex date exists is precisely because it takes some number of days for the trade to settle.

Hopefully that's clearer.

Yes, much clearer.  And hubris on my part.  Appreciate the clarification.

[EvenSteven]

This is all good information, but bottom line for the OP is that it doesn’t matter. Timing your sale around dividend payments won’t net you any extra dollars.

Depends, in some places cap gains are taxed differently from dividends.

Previous posts indicate they live in Denver. I suppose they could have moved out of the US.

[daverobev]

This is all good information, but bottom line for the OP is that it doesn’t matter. Timing your sale around dividend payments won’t net you any extra dollars.

Depends, in some places cap gains are taxed differently from dividends.

Previous posts indicate they live in Denver. I suppose they could have moved out of the US.

I was under the impression that in the US dividends can be qualified or not, and cap gains can be long term or not, but I don't know the intricacies.

[EvenSteven]

This is all good information, but bottom line for the OP is that it doesn’t matter. Timing your sale around dividend payments won’t net you any extra dollars.

Depends, in some places cap gains are taxed differently from dividends.

Previous posts indicate they live in Denver. I suppose they could have moved out of the US.

I was under the impression that in the US dividends can be qualified or not, and cap gains can be long term or not, but I don't know the intricacies.

VTI is almost all qualified dividends, which would be taxed at the lower rate equal to long term capital gains.