How's this sound for tying together those dates you mentioned?:
Consider a company that's declared a dividend on its stock payable Feb 1, 2017 to stockholders of record Friday, Jan 6. The ex-dividend date consequently is 2 days before that, or Wed, Jan 4. "Ex" means without. If someone were a buyer of the stock on Wed. Jan 4 they would not get the Feb 1 dividend -- the stock trades "without" the dividend, i.e. is ex-dividend.
Most stocks/stock exchanges use the T+3 rule. (Afaik, and we're moving to T+2 in 2017). This means if somebody wanted to buy the stock in time to get that Feb 1 dividend, they need to be on the company's books on that date of record (i.e. Friday, Jan 6). Which means their purchase transaction has to have settled on that Friday Jan 6 at the latest. For the stock to settle on Friday, it means their purchase (trade date) has to have been made Tue, Jan 2. That is, Trade date Tue + 3 business days = settlement date = Friday. Tuesday is the last day to buy the stock, in order for the trade (purchase) to settle and for you to be on the company record books to get the dividend. (Of course, if you bought and have held the stock before Tue, Jan 2, you're already on the record books, and you get the dividend.) Looking at it somewhat differently, if somebody bought the stock Wed (their trade date), the stock wouldn't settle until T+3 or Monday (Jan 9). That's when they'd be on the books (on the record) -- they'd not be on the record books Friday, and therefore they're not going to get the Feb 1 dividend.
I write this to reinforce/review/clarify what I believe to be correct. Sometimes this can be a confusing issue to me, even after many decades of being in the market. For example, these are the "requirements" just for stocks generally, For bonds, funds - I believe they may be different. |
