How to Buy Stock Right Before a Dividend Pays
Original post by Eric Feigenbaum of Demand Media
Dividends are corporate profits paid out to shareholders. Although not all classes of stock or companies issue dividends, these cash flows are highly valued as they provide income in addition to any return on investment. In times when market fluctuations drag down a company's stock price, dividends may continue on, mollifying shareholders and often stabilizing share prices. Investors often try to time buying stock to take advantage of a dividend payment. To do so, you have to do your homework and track various companies' board of directors meetings.
Research your target stock's last four dividend issues. Look for the rule the company's board of directors uses in issuing dividends. Some issue them to all holding shares on the day of a board meeting while others give them only to shareholders who held stock as of the beginning of the quarter, or as of specific dates in a prior quarter. You need this information to determine the cut-off date for holding stock and receiving a dividend. You can get this information online from the Securities and Exchange Commission's EDGAR database for free, or through stock guide and subscription services such as Standard and Poor's, Moody's or Dun and Bradstreet.
Obtain your target stock's next board of directors meeting. Dividends are issued by vote of a company's board, which usually meets quarterly. Publicly traded companies often list board of directors meetings and contact information on their websites. However, you can also look up scheduled board meetings and information through public records on EDGAR. This is important for companies that issue dividends to shareholders on the day of their meetings.
Purchase stock by the expected cut-off date. Depending on the company, this may be the last day of a quarter, the day before a director's meeting, or any other common date you discovered through your research.
Tips & Warnings
- You may want to consider consulting a stock broker who can quickly research the rules and requirements for any particular stock, including cut-off dates for dividends. As professionals, they are often familiar with the practices of common investments. Brokerages also have proprietary databases and software that make researching companies quick and easy.
- QFinance: Setting Up a Dividend Policy
- SEC: Filings and Forms - EDGAR
- Apple Inc.: Board of Directors FAQ
- American Airlines: Board Policies and Procedures
About the Author
Eric Feigenbaum started his career in print journalism, becoming editor-in-chief of "The Daily" of the University of Washington during college and afterward working at two major newspapers. He later did many print and Web projects including re-brandings for major companies and catalog production.
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