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After many years here, one of the most basic repeated questions has always been about dividends. As such, I will summarise the key points here that any beginner can refer to regarding dividends.
I would be using layman terms for the most part so beginners can easily understand.
A) Dividends are a distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders. Simply, dividends are what the company pays you for holding their stocks.
B) Dividends are not compulsory. It is different from Reits' distribution but the difference isn't gonna mean much to a layman.
C) Dividends can be pay out yearly, quarterly, monthly or even randomly without a fixed schedule. Most company that has a culture of paying out dividends though, would adhere to a certain frequency. Commonly found in the US is a quarterly payout.
D) Dividends has many dates that will appear to confuse beginners. Just for simplicity's sake, the following are the more important ones to note...
1. Ex-Div, this means excluding dividends. It means if you buy a stock on this day, it excludes the latest dividend payout. Do not buy on this date if you want the dividends.
e.g. ex-div is July 27, buy on July 26 or anytime before that to get dividends
I repeat, buy before July 27 to get dividends.
2. Pay date or Date Paid/Payable, all means the same. It is the date where you will see the dividends in your bank account. The day you received the $$.
Every time a company pays dividends, the ex-div date decide who would get the dividends while the pay date decides when you receive it.
3. CD or Cum-Dividend, it's not important. It basically means including dividends but it might confuse you as a beginner. Go wiki if you really need to know. Just don't bother if it's confusing you.
4. Record date, means nothing to you as a beginner. Don't bother. Go wiki if you really need to know. Just don't bother if it's confusing you.
E) Selling, if your sole purpose is to get dividends and you wish to sell the minute you are confirmed that you are entitled to a dividend, sell on ex-div date. How this works is, e.g. ex-div date is August 15, you want to get the dividends, you buy on August 14, hold it to August 15, sell it on August 15, ta-da, you have the dividends. Yes, holding it for a day is all it took.
Note that, it's a zero-sum game usually to try this method as the Stock would gap down(meaning move down) to show the pay out of the dividends.
E.g.
if ex-div is on February 12,
the stock price is $10 on Feb 11,
the dividends is $1,
The stock would most likely open at around $9 on Feb 12, thus taking into account the $1 dividend that is paid out.
So if you buy on feb 11 the stock would be $10. On feb 12, the stock would be $9, and you will be entitled to a $1 dividend.
The above is the usual case but there are exceptions where the stock swings back up immediately to the price pre-exdiv or $10 in this case. But the fall is nearly always gonna happen.
F) Also, dividends stocks in SG are not taxable. You will receive whatever amount is declared to be the dividends paid out. The tax is already done at the corporate stage, don't need to worry about it.
G) Another thing is dividends cash/shares options. A company can choose to pay you either with dividends shares or cash($), both the shares and the cash should come to about the same value though sometimes there might be a discount given for taking shares.
OCBC recently gives out discounted shares, i.e. their stock price per share is for example $10.30, they give you shares for $9.70.
That means if you are suppose to receive $19.40 in dividends, you will get to receive 2 shares of OCBC if you pick to take shares instead of dividends cash. You cannot choose both. Also, if your dividend cash has any left over, e.g. if you recevied $20 dividends and you choose shares, you will get 2 shares and $0.60 cash back into your bank account. I'm not sure about this but will update when someone can clarify.
edit: ok, scb will round down any odd shares so it's best to choose cash. As for shares round up/down, it still depends on the individual counters, always check before subscribing to shares or you might lose the leftover cash.
H) to find the dividend dates, refer to sgx.com, move your cursor to Company Information(the 2nd blue bar at the top), choose Corporate Action from the drop down list, and you will see all the dates for the dividends.
If you need to find a particular company's dividends, use the 'Company Name:' to find it.
I) Special dividends, these are dividends that are on top of the usual payout you see from the company, it is usually a 1 time thing and should be treated as a bonus.
J) Rights and other offers, this you will need to wiki.
Hope the above clears up most doubts people have with regards to dividends. Feel free to correct any mistakes you see and I will update this post.
I would be using layman terms for the most part so beginners can easily understand.
A) Dividends are a distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders. Simply, dividends are what the company pays you for holding their stocks.
B) Dividends are not compulsory. It is different from Reits' distribution but the difference isn't gonna mean much to a layman.
C) Dividends can be pay out yearly, quarterly, monthly or even randomly without a fixed schedule. Most company that has a culture of paying out dividends though, would adhere to a certain frequency. Commonly found in the US is a quarterly payout.
D) Dividends has many dates that will appear to confuse beginners. Just for simplicity's sake, the following are the more important ones to note...
1. Ex-Div, this means excluding dividends. It means if you buy a stock on this day, it excludes the latest dividend payout. Do not buy on this date if you want the dividends.
e.g. ex-div is July 27, buy on July 26 or anytime before that to get dividends
I repeat, buy before July 27 to get dividends.
2. Pay date or Date Paid/Payable, all means the same. It is the date where you will see the dividends in your bank account. The day you received the $$.
Every time a company pays dividends, the ex-div date decide who would get the dividends while the pay date decides when you receive it.
3. CD or Cum-Dividend, it's not important. It basically means including dividends but it might confuse you as a beginner. Go wiki if you really need to know. Just don't bother if it's confusing you.
4. Record date, means nothing to you as a beginner. Don't bother. Go wiki if you really need to know. Just don't bother if it's confusing you.
E) Selling, if your sole purpose is to get dividends and you wish to sell the minute you are confirmed that you are entitled to a dividend, sell on ex-div date. How this works is, e.g. ex-div date is August 15, you want to get the dividends, you buy on August 14, hold it to August 15, sell it on August 15, ta-da, you have the dividends. Yes, holding it for a day is all it took.
Note that, it's a zero-sum game usually to try this method as the Stock would gap down(meaning move down) to show the pay out of the dividends.
E.g.
if ex-div is on February 12,
the stock price is $10 on Feb 11,
the dividends is $1,
The stock would most likely open at around $9 on Feb 12, thus taking into account the $1 dividend that is paid out.
So if you buy on feb 11 the stock would be $10. On feb 12, the stock would be $9, and you will be entitled to a $1 dividend.
The above is the usual case but there are exceptions where the stock swings back up immediately to the price pre-exdiv or $10 in this case. But the fall is nearly always gonna happen.
F) Also, dividends stocks in SG are not taxable. You will receive whatever amount is declared to be the dividends paid out. The tax is already done at the corporate stage, don't need to worry about it.
G) Another thing is dividends cash/shares options. A company can choose to pay you either with dividends shares or cash($), both the shares and the cash should come to about the same value though sometimes there might be a discount given for taking shares.
OCBC recently gives out discounted shares, i.e. their stock price per share is for example $10.30, they give you shares for $9.70.
That means if you are suppose to receive $19.40 in dividends, you will get to receive 2 shares of OCBC if you pick to take shares instead of dividends cash. You cannot choose both. Also, if your dividend cash has any left over, e.g. if you recevied $20 dividends and you choose shares, you will get 2 shares and $0.60 cash back into your bank account. I'm not sure about this but will update when someone can clarify.
edit: ok, scb will round down any odd shares so it's best to choose cash. As for shares round up/down, it still depends on the individual counters, always check before subscribing to shares or you might lose the leftover cash.
H) to find the dividend dates, refer to sgx.com, move your cursor to Company Information(the 2nd blue bar at the top), choose Corporate Action from the drop down list, and you will see all the dates for the dividends.
If you need to find a particular company's dividends, use the 'Company Name:' to find it.
I) Special dividends, these are dividends that are on top of the usual payout you see from the company, it is usually a 1 time thing and should be treated as a bonus.
J) Rights and other offers, this you will need to wiki.
Hope the above clears up most doubts people have with regards to dividends. Feel free to correct any mistakes you see and I will update this post.
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