There are not many rules involved in collecting quarterly dividends. If you are a buy and hold investor in dividend-paying stocks, you will receive payments automatically. However, there are some important rules to keep in mind if you are planning to purchase stock in a new company.
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In order to collect quarterly dividends, you must own stock in a company that pays quarterly dividends. While quarterly payments are relatively normal among dividend-paying stocks, not all stocks pay dividends. Further, not all dividend-paying stocks issue dividends on a quarterly basis.
So long as you are a stockholder, dividends are paid automatically into your brokerage account. You do not need to take any special action to receive the dividend payment. The dividend is generally issued as a cash payment, although in some cases you may elect to reinvest the payment and purchase more shares through a dividend reinvestment program (DRIP).
To be eligible for a quarterly dividend payment, you must purchase the stock before the ex-dividend date. This date is set whenever a company declares a quarterly dividend. The ex-dividend date falls before the dividend payment date, so know that you have to buy a stock in advance of the actual payment date to receive a dividend.
When a company declares a dividend, it sets a record date. You must be on the company's books on or before the record date to receive the quarterly dividend. After this date is announced, the exchange sets the ex-dividend date for the stock. This date is typically set two business days before the record date. Remember that as an investor, you just need to purchase the stock before the ex-dividend date to be eligible.
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