Dividends are wonderful, but they're slightly more complicated than you might think. For example, there's the "ex-dividend" concept. A company's dividend is not simply paid to whomever is holding the stock on the day the dividend is paid. Instead, an "ex-dividend" date is set, often several weeks before payday. If you buy shares of a dividend-paying stock on or after the ex-dividend date, you won't receive the upcoming dividend payment. The person who owned the stock when it went ex-dividend gets that chunk of change.
You can often tell which stocks are trading ex-dividend, because they'll have a special designation in stock listings, such as an "x" next to their name.
You might think it would be a neat trick to buy such stocks just before they go ex-dividend, so that you can quickly profit from the dividend amount. But stock prices get adjusted downward around the ex-dividend date, to compensate for the upcoming dividend payout. As Snidely Whiplash would mutter, "Curses! Foiled again!"
Still, it's smart to consider dividends when seeking companies in which to invest. If a company's stock just languishes for a few years but it pays a solid dividend, you'll be able to profit during the lull. Some companies that have recently sported solid dividend yields include Tupperware (NYSE:TUP), Cedar Fair (NYSE:FUN), Sara Lee (NYSE:SLE), and Merck (NYSE:MRK).
One place to find good dividend-paying candidates is in our new stock newsletter, Motley Fool Income Investor, which will send you two investment recommendations each month. If you're interested, check it out (we're offering a risk-free trial right now).
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