RetireJapan

Dividends have four dates associated with them

1. Announcement Date - when the company announces they will pay a Dividend Payment on a certain date to shareholders of a certain date.
2. Goes Ex-Dividend Date - This is when the stock price is adjusted to account for the Dividend being Paid out
3. Shareholder of Record Date - If you own the Share on that date, you will receive the Dividend on the Payment Date
4. Dividend Payment Date - The date when the dividend is paid into your brokerage account.

There is usually about 2-3 weeks between the Shareholder of Record Date and the Dividend Payment Date when you could sell the stock, but still receive the payment of the dividend, so there is a price adjustment to account for this.

tim wrote: ↑Wed Sep 07, 2022 1:23 am

adamu wrote: ↑Tue Sep 06, 2022 5:11 pm

tim wrote: ↑Tue Sep 06, 2022 1:11 am I just want to buy and maybe sell after 5 years or 10 years

Why? What are your goals?

I'm thinking like most of my money will go to index funds and like 10% stocks will sell them short term like (3 - 10 years) if the price is good

You didn't really answer the question: what are your goals? Why do you want to invest? Only after deciding that can you make plans like: 90%/10% split, 3-10 year horizon, etc.

Tkydon wrote: ↑Wed Sep 07, 2022 9:12 am Dividends have four dates associated with them

1. Announcement Date - when the company announces they will pay a Dividend Payment on a certain date to shareholders of a certain date.
2. Goes Ex-Dividend Date - This is when the stock price is adjusted to account for the Dividend being Paid out
3. Shareholder of Record Date - If you own the Share on that date, you will receive the Dividend on the Payment Date
4. Dividend Payment Date - The date when the dividend is paid into your brokerage account.

There is usually about 2-3 weeks between the Shareholder of Record Date and the Dividend Payment Date when you could sell the stock, but still receive the payment of the dividend, so there is a price adjustment to account for this.

Thank you very much for a thorough explanation. Very useful.

One more question, it sounds like these dividends payments would be very attractive for speculative purchases. Purchase stock on the shareholder of record date and then dump it afterwards. Is that typical? Is it common for the price of stocks to drop a lot after the record date?

MBK wrote: ↑Thu Sep 08, 2022 12:18 am

Tkydon wrote: ↑Wed Sep 07, 2022 9:12 am Dividends have four dates associated with them

1. Announcement Date - when the company announces they will pay a Dividend Payment on a certain date to shareholders of a certain date.
2. Goes Ex-Dividend Date - This is when the stock price is adjusted to account for the Dividend being Paid out
3. Shareholder of Record Date - If you own the Share on that date, you will receive the Dividend on the Payment Date
4. Dividend Payment Date - The date when the dividend is paid into your brokerage account.

There is usually about 2-3 weeks between the Shareholder of Record Date and the Dividend Payment Date when you could sell the stock, but still receive the payment of the dividend, so there is a price adjustment to account for this.

Thank you very much for a thorough explanation. Very useful.

One more question, it sounds like these dividends payments would be very attractive for speculative purchases. Purchase stock on the shareholder of record date and then dump it afterwards. Is that typical? Is it common for the price of stocks to drop a lot after the record date?

Yes, they will generally drop by the amount of the dividend

My rule of thumb after countless expensive mistakes is that any clever little hack I find in the markets was priced in decades ago

RetireJapan wrote: ↑Thu Sep 08, 2022 12:23 am

MBK wrote: ↑Thu Sep 08, 2022 12:18 am

Tkydon wrote: ↑Wed Sep 07, 2022 9:12 am Dividends have four dates associated with them

1. Announcement Date - when the company announces they will pay a Dividend Payment on a certain date to shareholders of a certain date.
2. Goes Ex-Dividend Date - This is when the stock price is adjusted to account for the Dividend being Paid out
3. Shareholder of Record Date - If you own the Share on that date, you will receive the Dividend on the Payment Date
4. Dividend Payment Date - The date when the dividend is paid into your brokerage account.

There is usually about 2-3 weeks between the Shareholder of Record Date and the Dividend Payment Date when you could sell the stock, but still receive the payment of the dividend, so there is a price adjustment to account for this.

Thank you very much for a thorough explanation. Very useful.

One more question, it sounds like these dividends payments would be very attractive for speculative purchases. Purchase stock on the shareholder of record date and then dump it afterwards. Is that typical? Is it common for the price of stocks to drop a lot after the record date?

Yes, they will generally drop by the amount of the dividend

My rule of thumb after countless expensive mistakes is that any clever little hack I find in the markets was priced in decades ago

If I understood the above message from Tkydon correctly, the stock price is adjusted for dividends at the "Goes Ex-Dividend Date". When is that usually?

Every gets very excited when they learn about dividends, but the reality is that they are not free money.

The stock price adjust to reflect the dividend payment, and lets not forget, you have to pay capital gains tax on that dividend.

........

Should You Care Whether Stocks Pay Dividends?
Choi says there are some popular financial books that advise people to buy stocks that pay dividends. For the uninitiated, dividends are checks that companies send to their shareholders typically every quarter. "There seems to be this fascination with generating 'income' from your investments," Choi says.

Economists, generally speaking, think this is dumb. "If I need to spend some money from my wealth, I don't need to wait for the company to send me a check," Choi says. "I can just sell some shares and use the proceeds from that sale to finance my expenditure needs. And so there should be no reason why I prefer stocks that pay dividends versus stocks that don't pay dividends. And in fact, dividends are tax-disadvantaged. So, a stock that pays dividends is going to put a bigger tax burden on you, all else equal, than a stock that doesn't pay dividends."

Choi is with Team Economist on this one.

..............

https://www.npr.org/sections/money/2022 ... eting-tips

adamu wrote: ↑Wed Sep 07, 2022 1:21 pm You didn't really answer the question: what are your goals? Why do you want to invest? Only after deciding that can you make plans like: 90%/10% split, 3-10 year horizon, etc.

What are your goals?
- At first to save my savings from inflation
- Hoping to get my money (dividends perhaps, for now I configured it to be reinvested)

Why do you want to invest?
- Save money and hopefully have a passive income

I still don't understand the basic fundamentals but
- Since time is in the essence, I just willy nilly bought stocks haha (Bad action)
Bought GOOGL and ERF

- I still don't know how will I get my money back, is it either dividends or by selling the stocks.
- I invested to NISA but I cant invest all my money on it cause its limited per month
and doesn't have a bonus setting also why is it not reflecting when the set date is

Sorry for the stupid questions
If you can give me a link or a video about this, It would be of great help.

TokyoBoglehead wrote: ↑Thu Sep 08, 2022 1:30 am Every gets very excited when they learn about dividends, but the reality is that they are not free money.

The stock price adjust to reflect the dividend payment, and lets not forget, you have to pay capital gains tax on that dividend.

........

Should You Care Whether Stocks Pay Dividends?
Choi says there are some popular financial books that advise people to buy stocks that pay dividends. For the uninitiated, dividends are checks that companies send to their shareholders typically every quarter. "There seems to be this fascination with generating 'income' from your investments," Choi says.

Economists, generally speaking, think this is dumb. "If I need to spend some money from my wealth, I don't need to wait for the company to send me a check," Choi says. "I can just sell some shares and use the proceeds from that sale to finance my expenditure needs. And so there should be no reason why I prefer stocks that pay dividends versus stocks that don't pay dividends. And in fact, dividends are tax-disadvantaged. So, a stock that pays dividends is going to put a bigger tax burden on you, all else equal, than a stock that doesn't pay dividends."

Choi is with Team Economist on this one.

..............

https://www.npr.org/sections/money/2022 ... eting-tips

Thank you for further information. I did not really care about the dividends initially, and found out that the stock pays out dividends only after purchase, so the whole system is new to me and I`m trying to get better understanding of how will influence the stock price going forward.

Naturally, the passive income from the dividends does sound good on paper, though in the long run(and wit speculative purchase even in the short run) can make you gain 5, just to lose 10.

For tax levied on dividends, it`s the same 20% capital gains tax, correct?

MBK wrote: ↑Thu Sep 08, 2022 12:30 am If I understood the above message from Tkydon correctly, the stock price is adjusted for dividends at the "Goes Ex-Dividend Date". When is that usually?

See

https://www.investopedia.com/articles/s ... %20trading.

If I buy the stock after the Shareholder of Record date, I won't receive the dividend at the next payment date, which was priced into the stock price before the ex-dividend date. But also, I am buying a company whose total value is less by the total value of dividends paid (Total Shares outstanding x Dividend Per Share) than it was before the Ex-Dividend Date.

https://finance.yahoo.com/quote/MSFT/history?p=MSFT

If you look at Yahoo Finance, you will see that the Ex-Dividend Date is noted, and the Adjusted Closing Price Column adjusts prices before the Ex-Dividend Date to make allowance for the Dividend (to be) paid out.

The Dividend is paid out of the Company Assets, so the value of the Company Assets is reduced by the amount of the dividend after the dividend is (to be) paid out than it was before, so the historical share price is adjusted to reflect that.

If you see the latest Dividend Announcement from Microsoft as an example

https://news.microsoft.com/2022/06/14/m ... vidend-18/

"REDMOND, Wash. — June 14, 2022 — Microsoft Corp. on Tuesday announced that its board of directors declared a quarterly dividend of $0.62 per share. The dividend is payable Sept. 8, 2022, to shareholders of record on Aug. 18, 2022. The ex-dividend date will be Aug. 17, 2022."

1. Announcement Date: June 14, 2022 is a Tuesday...
2. Ex-Dividend Date: The working day before the Shareholders of Record Date, so Aug. 17, 2022
3. Shareholders of Record Date: Aug. 18, 2022
4. Payment Date: Sept. 8, 2022

MBK wrote: ↑Thu Sep 08, 2022 2:14 am
Thank you for further information. I did not really care about the dividends initially, and found out that the stock pays out dividends only after purchase, so the whole system is new to me and I'm trying to get better understanding of how will influence the stock price going forward.

Naturally, the passive income from the dividends does sound good on paper, though in the long run(and wit speculative purchase even in the short run) can make you gain 5, just to lose 10.

For tax levied on dividends, it`s the same 20% capital gains tax, correct?

Japanese Taxes on Dividends.

If you hold shares in a regular account, your broker is obliged to withhold Dividend Tax on the Dividends you receive at the Dividend Tax Rate of 20.42%.

At Kakutei Shinkoku Time, you can elect to have your dividends taxed by the Aggregate Income Taxation Method at your marginal Tax Rate OR by the Separate Taxation Method for Dividend Income at the fixed Tax Rate of 20.315% (15% National, 0.315% Reconstruction and 5% Residents' Tax Rates).

Due to some credits that I will not go into here, as I have written about it before...
For Dividends on Japanese Stocks, if your Total Taxable Income is less than about Y6M, then it would be better for you to select the Aggregate Income Taxation Method at your marginal Tax Rate.

For Dividends on Foreign Stocks, if your Total Taxable Income is less than about Y3.5M, then it would be better for you to select the Aggregate Income Taxation Method at your marginal Tax Rate.

Otherwise, it would be better for you to select the Separate Taxation Method for Dividend Income at the fixed Tax Rate of 20.315% (15% National, 0.315% Reconstruction and 5% Residents' Tax Rates).


Dividends:

Usually companies have to be quite mature with good stable cashflow before they will start paying dividends. Once started, it is not good for the company's reputation if then have to reduce or stop paying dividends, but it can happen if the company falls on hard times (e.g. COVID).

The company makes sales, earns revenue, pays its bills, pays its taxes, and what is left is the Free Cashflow (remember Post-Tax...).

The company can then use this Free Cashflow in any combination of the following activities:
1. Reinvest in Themselves - internally invest in current and new projects to maintain and increase profits in the future
2. Make Acquisitions - to add sources of revenue to maintain and increase profits in the future
3. Pay Down Debt - increasing the value of the company by reducing the liabilities
4. Buy Back Shares - reducing the total number of shares outstanding, so increasing the portion of profits allocated per share in the future
or/and
5. Pay Dividends - If they don't think they can make a better return for shareholders in any of the above, the company will pay the money out to shareholders so that the shareholders can go and use it or reinvest it for a better return somewhere else.

It is nice to receive the Dividend, but you have to remember that the dividend is paid out of After Tax Free Tax Flow (has already been taxed).
You then get taxed again on the Dividend Income (Unavoidable Double Taxation).
If you want to use the Dividend Income to live on in Retirement, then that may be perfectly OK. Alternatively, you could just sell some shares occassionally...
But, if you are investing for the Long-Term, then this may not be the most efficient strategy...
You could think of the Dividend Taxes as being 'equivalent' to the high Fees on Managed Mutual Funds, reducing the compounding effect of your investments over time.