Investing in Dividend Payments
Companies that may be worthy of investing in financial stability and offering huge dividends are likely to have a record low interest rate on Treasury bills and certificates of deposit (CDs). There are a considerable number of dividends as high as 9% to 12%. Before you buy a stock from a dividend paying company, there is an important term you should know, which is called Ex-date or Ex-dividend date.
On dividend date (or after), there is no dividend on securities transactions. If you pay dividends on the day before the ex-dividend date, you will receive a declared dividend, but if you buy before the ex-dividend date, you will not receive a dividend. Conversely, if you want to sell a company's stock, but still receive a dividend, you need to ex-dividend date (or after) the sale.
People may think that trading dividend payments can be a money machine – all you need to do is buy stock before liquidation and then resell it on or after the settlement date to collect dividends. In reality this does not work because the market is very efficient. As the dividend is paid and the market discounts the stock price, you may see the stock price drop after the ex-dividend date.
You can easily find a listed company in the financial section of a major search site like Yahoo or Google Expiration Date. In researching these payout dividends, you should look at companies that have strong balance sheets and are leaders in their respective industries – companies like Microsoft and Bank of America seem to offer a huge opportunity for dividends.