Do you realize that when you make your regular investments makes a difference in what you will eventually accumulate?
No, we’re not talking about “market timing,” which involves guessing when the price will be at a low point. We are talking about the “Extra Dividend Strategy,” which can help you increase the amount of dividends that get reinvested each quarter.
While capturing the next dividend may seem like a minor concern. When you consider the implications over the long term, missing out on this strategy means that you lose in two ways:
First, the dividend that you would have earned will not be invested this quarter…and will not compound for the next 20, 30, or however many years you own the stock.
Second, if you set up a quarterly investment program on the wrong schedule, you’ll miss out on that “extra” dividend each and every quarter, and each and every one of those “lost” dividends will also fail to compound over the life of your investment.
Let’s back up for a minute and define some terms:
What does the Ex-Dividend Date mean?
The Ex-Dividend Date is the day on which all shares bought no longer come with the right to be paid the most recently declared (next paid) dividend. It is important for investors, since you must own a stock beforethe ex-dividend date in order to receive the next scheduled dividend.
The ex-dividend date generally precedes the record date by two business days (to allow time for any transactions to settle).
What does the Record Date mean?
Shareholders whose ownership is properly registered on or before the Record Date will receive the dividend. Shareholders who are not registered as of this date will not receive the dividend.
For DRIP investors, the two key dates to focus on are the Ex-Dividend Date and the last DRIP purchase date (Next Investment Date) prior to the Ex-Dividend Date. You can quickly get these dates by entering the ticker symbol in the spaces provided on the left.