Dividend dates explained

Dividend dates explained

There are two fundamental things you should know about making growth stock picks.

Dividend stocks are an essential part of a good conservative investing philosophy. But there are certain details you should know about the way dividends are paid out.

Here are a number of key dates related to the payment of dividends.

Dividend dates explained: The declaration date

Several weeks in advance of a dividend payment, a company’s board of directors sets the amount and timing of the proposed payment. The date of that announcement is known as the declaration date.


Find the True Blue Chips

Blue chip stocks give investors an extra measure of safety in today’s volatile markets. But not all stocks with a blue chip “reputation” deserve that label.

True blue chip stocks are well-established, dividend-paying companies with strong positions in their industries—and management that makes the right moves in a changing marketplace. Pat McKeough shows you how to identify these long-term winners in "Finding the Real Blue Chips Stocks: The Power and Security of Canada’s Best Dividend Stocks."

Download this free report  >>


Dividend dates explained: The payable date

The payable date is the date set by the board on which the dividend will actually be paid out to shareholders.

Dividend dates explained: The record date

Only shareholders who hold the shares before the payable date will receive the dividend payment. That date is known as the record date, and is set any number of weeks before the payable date.

Dividend dates explained: The ex-dividend date

Two business days before the record date, the shares begin to trade without their dividend.

This date is the ex-dividend date. If you buy a dividend-paying stock one day or more before the ex-dividend date, you will still get the dividend. That’s when a stock is said to trade cum-dividend. If you buy on the ex-dividend date or later, you won’t get the dividend. The ex-dividend date is in place to allow pending stock trades to settle.

Investor bonus: How to become a successful investor

We think investors should invest the bulk of their investment portfolios in high-quality, mostly dividend-paying stocks, well diversified among the five economic sectors.

You should also invest mainly in stocks that are in our Average or higher Successful Investor or Wall Street Stock Forecaster Ratings. These are stocks most likely to survive a period of adversity and go on to thrive all over again when conditions improve. An investor following this advice would be a “conservative” investor.

A smaller part of your portfolio could be invested in smaller, more aggressive stocks like those we recommend in Stock Pickers Digest. We look at many stocks before singling out our aggressive favorites, and we try to choose those with as much underlying value and as many hidden assets as possible. This is the best way to cut risk, for conservative and aggressive investors alike.

However, always remember that aggressive stocks, unlike many conservative stocks, don’t have a secure hold on a growing or stable client base. When something goes wrong with aggressive investments, there is great risk of serious if not total loss.

No matter what kind of stocks you invest in, you should take care to spread your money out across the five main economic sectors: Finance, Utilities, Consumer, Resources & Commodities, and Manufacturing & Industry.

By diversifying across most if not all of the five sectors, you avoid overloading yourself with stocks that are about to slump simply because of industry conditions or investor fashion.

You also increase your chances of stumbling upon a market superstar—a stock that does two to three or more times better than the market average.

In summary: Here’s our three-part Successful Investor strategy:

  • Invest mainly in well-established companies;
  • Spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; Consumer; Finance; Utilities);
  • Downplay or avoid stocks in the broker/media limelight.

What are dividends?

Dividends are typically cash payouts that serve as a way companies share the wealth they’ve accumulated through operating the company. These payouts are drawn from earnings and cash flow and paid to the shareholders of the company. Typically these dividends are paid quarterly, although they may be paid annually or monthly as well. Dividends can produce as much as a third of your total return over long periods

How much of your portfolio is dedicated to dividend-paying stocks? Leave a comment and let’s discuss.

Comments

Tell Us What YOU Think

You must be logged in to post a comment.

Please be respectful with your comments and help us keep this an area that everyone can enjoy. If you believe a comment is abusive or otherwise violates our Terms of Use, please click here to report it to the administrator.