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Trading on ex-dividend dates can be confusing. The ex-dividend date is also important to dividend growth investors. It is the ex-dividend date that determines which investor, the buyer or seller, receives the dividend. Ex-dividend dates are used to make sure dividend checks go to the right people. Settlement of stocks is a T+3 procedure, which means that when you buy a stock it takes three business days from the transaction date, T, for the stock purchase to be entered into the company's record books. Below is a table exhibiting a weekend T+3 settlement of stock.

Tuesday

7th

Wednesday

8th

Thursday

9th

Friday

10th

Saturday

11th

Sunday

12th

Monday

13th

with
dividend

with
dividend

Ex- Dividend

T

without dividend

T+2

Market Closed

Market Closed

Record Date

T+3

Extended Hours Trading

Another area of confusion about ex-dividend dates is how pre-market and after-hour trading influences dividends. The ex-dividend date includes extended hours trading both pre-market and after hours (7:00 a.m. ET to 8:00 p.m. ET). Pre-market trading occurs from 7:00 a.m. to 9:30 a.m. After-hours trading on a day with a normal session occurs from 4:00 p.m. to 8:00 p.m.

Record and Payment Date

Traders should also take note of the payment date. The payment date or "payout date" is the day when the dividends will actually be delivered to the shareholders of a company and credited to brokerage accounts. For instance, Apple's (AAPL) board of directors officially declared a $2.65 dividend per share on July 24, 2012. The dividend is payable on Aug. 16, 2012, to stockholders of record or "unit holders of record" as of the close of business on Aug. 13, 2012. The ex-dividend date is Aug. 9, 2012.

If you are not on Apple record books on the date of record, you will not receive the dividend payment. To ensure that you are in the record books, you need to buy the stock at least three business days before the date of record, which also happens to be the day before the ex-dividend date.

Buying Apple Stock

If you were to buy a stock before the ex-dividend date, no matter if in pre-market trading, regular trading or after-hours trading, you do qualify for the dividend.

If you were to buy on or after the ex-dividend-date, whether in pre-market trading, regular trading, or after-hours trading, you do not qualify for the dividend.

For example, if a trader were to buy Apple stock before Wednesday, Aug. 8, 2012, 8:00 p.m. (after hours), he or she would receive Apple's $2.65 dividend, payable Aug. 16, 2012. However, if a trader were to buy Apple stock on or after the ex-dividend date, Aug. 9, 2012, he or she does not qualify for the dividend.

Selling Apple Stock

If you sold shares before the ex-dividend date no matter if in pre-market trading, regular trading or after-hours trading, you will not qualify for the dividend.

If you sold shares on or after the ex-dividend date, whether in pre-market trading, regular trading, or after-hours trading, you do qualify for the dividend.

For example, if a trader sold Apple shares on or after Thursday, Aug. 9, 2012, 7:00 a.m., he or she would receive Apple's $2.65 dividend, payable Aug. 16, 2012.

Yet if a trader were to sell Apple shares on or before the ex-dividend date, Aug. 8, 2012, he or she does not qualify for the dividend.

Prior to Ex-Dividend Dates

Traders must also consider that it is common for a stock's underlying price to decrease on or before the ex-dividend date by an amount approximately equal to the dividend. This reflects the decrease in the company's assets resulting from the declaration of the dividend. The declaration date or "announcement date" is the day on which a company's board of directors announces its next dividend payment.

Below is a list of stock types (common shares, preferred shares, ETFs, ETNs, and ADRs) and bonds reporting an ex-dividend date Aug. 9, 2012.

Company

Name

Ex-Div

Date

Pay

Date

Dividend

Payout

Apple Inc. (AAPL) 8/9 8/16 $2.65
CNA Financial Corp. (CNA) 8/9 8/29 $0.15
Rockwell Collins (COL) 8/9 9/4 $0.30
DR Horton (DHI) 8/9 8/24 $0.0375
Dreyfus Municipal Income Inc. Com. (DMF) 8/9 8/31 $0.0525
Dreyfus Strategic Municipal Bond Com. (DSM) 8/9 8/31 $0.0475
First Bancshares Inc. (FBMS) 8/9 8/27 $0.0375
U.S. Global Investors Inc. (GROW) 8/9 8/27 $0.02
W.W. Grainger (GWW) 8/9 9/1 $0.80
Great Plains Energy Inc. Pfd 3.80% GXP-A 8/9 9/1 $0.95
Great Plains Energy Inc. Pfd 4.35% GXP-D 8/9 9/1 $1.0875
Great Plains Energy Inc. Pfd 4.50% GXP-E 8/9 9/1 $1.125
Kaiser Federal Financial Group Inc. (KFFG) 8/9 8/29 $0.08
Dreyfus Strategic Municipals, Inc. Com. (LEO) 8/9 8/31 $0.049
Lazard Global Total Return/Income Fund (LGI) 8/9 8/23 $0.08068
Lazard World Dividend/Income Fund (LOR) 8/9 8/23 $0.06635
Landstar Systems (LSTR) 8/9 8/31 $0.06
National Instruments (NATI) 8/9 8/31 $0.14
PetMed Express Inc. (PETS) 8/9 8/24 $0.15
Rockwell Automation (ROK) 8/9 9/10 $0.47
Southern National Banc. of Virginia Inc. (SONA) 8/9 8/24 $0.025
United Community Bank (UCBA) 8/9 8/31 $0.11
Virtus Global Multi Sector Income (VGI) 8/9 8/20 $0.117
Exxon Mobile (XOM) 8/9 9/10 $0.57

Disclaimer: Dividend dates and payouts are always subject to change.

Source: How Ex-Dividend Dates Work