My question is basically why are they so far away from the payment date? Itās infuriating!
I can understand a small window, maybe a week, because it prevents trading before earnings reports, but I donāt understand why they need more than that.
Today I just received a dividend of Ā£1.83 from MNG. Which sounds great, except it was only for 15 shares and I actually own 264 shares because Iāve been buying more shares every day as I dollar cost averaged my way into the market.
Given the dividend was much higher than previous ones, this is really annoying, but I only have myself to blame as I was only a couple of days into my investing on the ex-dividend date, and I havenāt even thought about dividends and deadlines at that point.
Iāve been caught out by it to a lesser degree with some US shares where the difference was about 1-2 weeks, but 6 weeks gap between ex-dividend and payment seems excessive.
Does anyone know why these periods are so long? And is there a general difference between US and UK companies in this regard? Or is this just MNG?
The London Stock Exchange guideline for dividend payments is 30 business days from the record date so 6 weeks sounds about right. Most of mine are 4+ weeks.
Not sure about any guidelines for US securities but some of mine were a month after ex-dividend date although the average is around 2 weeks for most looking at the dividend calendar.
I thought that the payment date should be three days afterwards so as to wait for a three day settlement. But even then we have blockchainā¦ so could be sooner if wanted
I never understood the UK AU div schedules. Always biannually and donāt seem to follow a reliable schedule. I try to keep my investments in quarterly or monthly payers, which is mostly in the US. Of course I still have UK div payers.
From wikipedia:
"US: The ex-dividend date is normally the business day (2 days minus 1) before the record date. "
āUK: For shares listed on the LSE the ex-dividend date is usually one business day before the record date. The ex-dividend date is almost always on a Thursday with the associated record date on the next day.ā
There is no reason to have such a long time between the dates. 3 days is too long!
You may not like it but there will be MANY reasons for this One off the top of my head is the interest the company keep in that time adds up. Another could be to incentivise people keeping hold of shares longer and not just buying then selling.
My guess is itās a historic tradition that just hasnāt been improved yet. Before computers and the internet it could have taken over a week just to read through the shareholder list and calculate how much to pay each person. Then do it again to check that the first calculations were correct.
Youāre better off missing the dividend anyway. On the ex-div date the share price dropped. Any shares you bought between the 19th and 29th of March will be worth more now than the dividend that you could have received.
Yes, I read that the market will correct itself. In a bull market this might well be actually worth buying, because now the stock is discounted but minus the expected dividend payout.
I read that the ex-date is one business day before the date of record. If I buy shares on the 28th April from a company with an Ex-Div date on the 29th April, then shall I be entitled to the payment?
Not really any different if your share was worth Ā£10 then div announced of Ā£5 you would have Ā£15 and if you bought Ā£10 worth after the share dropped due to the dividend you would have Ā£10 so no better than keeping in the first place.
Both approaches would gain from the āafter dividendā so no you would not be better off in any way I can work out.
Except that you would have paid stamp duty on the purchase just to receive a portion of your money back later.
It works more like this:
Ā£10.00 purchase includes Ā£0.04 stamp duty so your share is worth Ā£9.96.
Ā£5.00 dividend causes your share value to reduce to Ā£4.96.
Six weeks later the dividend is paid so you have Ā£4.96 invested and Ā£5 in cash = Ā£9.96.
It is the incentivise bit I mean Many people buy shares stupidly and come and go slowly losing money on transactions but feeling they gain. If they see they will get a gain in 6 weeks they may hold on longer then it is nearly time again.
But if you wanted the Ā£5 in cash then why not just buy the smaller amount after the ex-div date?
Buy Ā£5, includes Ā£0.02 stamp duty. Now you have Ā£4.98 invested plus the Ā£5 that you didnāt spend = Ā£9.98. You have more value and you donāt need to wait 6 weeks to get the Ā£5 cash back.
Or if you want to have Ā£10 invested then wait until after the ex-div date and buy the Ā£10. Then you have all Ā£9.96 invested and arenāt waiting for part of it to be returned as cash.
But I donāt want the Ā£5 now or any scenario you mentioned. I want my Ā£10 now being worth Ā£15 and if the buying Ā£10 after divi date was now worth say Ā£15 then my original Ā£15 would be worth Ā£17.50 if I kept with the original method.
Maybe I am having a crazy moment but I donāt see why I would avoid the divi, especially when it is not a guarantee the price goes back all the way and if it does I still gain that on top of the dividend.
When you buy shares you own part of the company. When that copmany pays a dividend it is the same as you paying yourself some money. When you pay yourself you donāt actually gain anything.
What happens with dividends is the value of the dividend is removed from the share value, so your Ā£10 does not become Ā£15. Your Ā£10 becomes Ā£5 in shares and Ā£5 in cash.
Yes. Itās not too clear from your example as you didnāt mention the record date, but the ex-dividend date is the first date that is NOT eligible for shares.
So, in your example, the ex-dividend date is 29th April, record date is 30th April and only shares bought on 28th April or earlier are counted.
The six week timeline definitely isnāt a hard rule. EQQQ paid a dividend in March just 5 calendar days after the ex-div.
The longest I have experienced is 57 calendar days back in 2019.
Yes I am not a muppet but my bank/portfolio doesnāt care. When I decide to cash in dictates the money I get but still donāt see your point at all.
When you pay yourself you do gain as you CAN actually spend that money but the company doesnāt gain anything. This is quite a bit different.
Now if you are moving the conversation to āis dividends a good chaseā that is different but the topic was you saying it is better to buy after dividend and I donāt agree with the theory you mentioned, sorry.
Edit - one thing i did forget to mention though was you could obviously re-invest the Ā£5 dividend to make my maths right. I was assuming and you know what they say about assuming people know things
One off the top of my head is the interest the company keep in that time adds up. Another could be to incentivise people keeping hold of shares longer and not just buying then selling.
and the other way you have the Ā£4.96 in the bag and not hoping it may happen.