The title above says it all. I am trying to understand how dividends work. I know dividends go to the owner of the stock on the date of record but what if there are several owners that day?
It's really who owns the shares before market open on date of record, in which case there can only be one owner.
As I understand it, the person who owns the stock at the start of trading in the ex-date gets the dividend. The dividend date is different than the ex-date.
Yes! I meant ex-div not DOR. Please only pay attention to what I meant to write, not what I wrote. That standard seems good enough for today's politicians!
One of the many benefits of this forum is there are enough of us more experienced investors to help keep the info in here as accurate as possible. So thanks for the save @TomB16 !
Okay, assuming that is correct, Three Eyes and TomB16, it raises another question in my mind: when do I have to purchase the shares to own them on the ex-date? Is it at least three days before, because of the settlement period?
Purchasing shares before the close on the date prior to the ex-div date will make you eligible for the dividend. You'll note that when the stock opens on the ex-div date, it will often open lower than the close on the previous day. Assuming no other factors moving the stock price, a stock distributing .50 will open .50 lower on the ex-div date. In reality, it's not that clean, because market-moving news or perceived changes in the stock fundamentals itself also plays into the opening price.
You technically own the shares the instant the matching engine allocates them to you. The settlement date is not relevant with regard to dividends. I've had two cases of synthetic DRIPs when I've sold a position after the ex date and ended up having 0 shares for a couple of weeks and then some shares popped back into the account from the drip. In both cases, my broker took care of selling the shares without fee (I'm not with Robin Hood).
