NOOB question

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22nd Feb '18 by cheehowan

7 comments 3846 reads

Hi guys,

I have a relatively Noob question as the information online is confusing.

I recently purchased Plus500 shares as the dividend payment was about 12%.

The ex dividend date is today and record date tomorrow.

There are differing reports on whether I will receive my dividends if I sell today (ex dividend day or sell tomorrow (on the record day).

If I sell today, will I get my dividends (share price has dropped 7% which means I would get 5% profit.

Cheers and thanks in advance!!,
C.

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Cheehowan

Premium Member

7 comments

monions

22nd Feb '18

The Ex Div date is the important one. It is the date the dividend is taken out of the price - so effectively the dividend has been allocated for payment. The last day you can receive the dividend is the day prior to Ex Div - i.e. yesterday. If you sell today, you will still receive the dividend, but if you buy today you will not as the share is now Ex Dividend (without dividend).

PLUS dropped by about 100p this morning, this is about the dividend amount.

I had the same confusion when I started - until someone said that the Ex Div is the important date and ignore the record date.

Hope that helps.

cheehowan

22nd Feb '18

Thanks Monions. That helps alot.

I think my window to sell may have passed it was at 5% drop at one stage.

BlueFrew

22nd Feb '18

Most (UK) trades are settled two days after the selling transaction. So if you sell on a Wednesday before the ex-dividend day your trade will be settled on the Friday. So at the close on Friday the person who bought the shares will be on the share register and the record will show that they are to receive the dividend.

Alternatively if you sell on the Thursday (the ex-dividend day) the trade will not settle until the Monday. So at the close of business on Friday your name will still be on the share register. The record will show that you are entitled to the dividend. The person to whom you have sold is not on the register so does not receive the dividend.

Other settlement times are available, but the price received will take dividends into account (among other things).

Ex-dividend day used to be on a Wednesday when settlement was T+3. It changed to T+2 on 6th October 2014. http://www.londonstockexchange.com/traders-and-brokers/rules-regulations/change-and-updates/stock-exchange-notices/2013/n1413.pdf

lemonjar

23rd Feb '18

Sorry, a noob question from me too, even noobier probably. Are people just selling and causing yesterday's sp drop coz they're just exiting now they pocketed the dividend? So they were in it for the dividend rather than a longer term hold?

bwakem

23rd Feb '18

The shares will normally be marked down by the divi price automatically. If a 10p divi has gone ex-div then the shares are obviously now worth 10p less and the divi was priced-in beforehand.

lemonjar

23rd Feb '18

ok thanks bwakem, got it! (sorta :)

Gromley

26th Feb '18

Hi lemonjar,

Not such a noob question imho as I believe many still think of dividends as events that generate shareholder value.

I think of it as a right pocket / left pocket transaction.

In your right pocket you have a £10 note.
You exchange it for a 10% share in a bundle of 10 £10 notes, the share certificate goes in your left pocket. Your net worth is still £10.
"BundleofTennersCorp" declares a 10% dividend, so you receive a pound coin that you put in your right pocket..
You now have a pound coin plus a 10% share of £90. Still adds up to £10.

Of course BoTcorp might be run by a genius capable of increasing the value of the investment, in which case people might buy your share for more than par value or it may be run by a duffer in which case you will struggle to find anyone prepared to buy your share for par.

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Cheehowan

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