Dividends are cash payments to shareholders of a corporation. Because publicly traded shares change hands several times over the course of a year, companies use reference dates to determine who is entitled to a dividend. If you own the stock on the record date, you are entitled to a dividend. If, however, you buy the stock on or after the ex-dividend date, you will not receive a dividend. Keeping track of these dates and selling the stock immediately after you become entitled to receive a dividend will result in the fastest possible cash flow while still giving you dividend rights.
Determine the ex-dividend date. The ex-dividend date is the first day on which a shareholder can sell her stock without losing her dividend rights.You can usually find the ex-dividend date by searching for past news about your stock on a finance portal, such as Yahoo Finance or Google Finance. Another way to find the ex-dividend date is to contact the investor relations department of the stock's issuer. If only a dividend record date is available, simply go back two business days from the record date to find the ex-dividend date. Assume, for example, that the record date is Monday, Feb. 10. The ex-dividend date would be Thursday, Feb. 6.
Place a sell order for your stock on the ex-dividend date. You can wait for regular market hours, which is the 6.5-hour uninterrupted time-span between 9:30 a.m. and 4 p.m. in the United States, or sell your stock before the market opens in what is known as pre-market trading. Similarly, you can sell your shares after the market closes in "after-hours trading" following the official close of the market at 4 p.m.. As long as the sale date is the ex-dividend date or a later date, you will be entitled to receive a dividend from the issuing firm.
Check your trade confirmation to ensure that the stock sale has gone through. Keep in mind that if you place a limit order, the sale may not go through. If, for example, the lowest price you will accept as per your order is $11 and the stock trades between $10 and $10.90 throughout the day, you will not be able to sell your holdings. Therefore, if you absolutely must sell the stock on the ex-dividend date and recoup the cash, place a realistic order. If the market price suddenly moves down and what was previously a realistic limit order is now out of the stock's probable trading range, revise your order by lowering your limit price to ensure a sale.
Hunkar Ozyasar is the former high-yield bond strategist for Deutsche Bank. He has been quoted in publications including "Financial Times" and the "Wall Street Journal." His book, "When Time Management Fails," is published in 12 countries while Ozyasar’s finance articles are featured on Nikkei, Japan’s premier financial news service. He holds a Master of Business Administration from Kellogg Graduate School.