Welcome to Ask Fear and Greed, where we answer questions about business, investing, economics, politics, and more. I'm Michael Thompson, and hello, Sean Aylmer. Hi, Michael, got a good one for you today. They're all good, They're all good, but today is a good one, especially for anyone who's interested in investing. Invested in investing. I was about to say, and then I realized that would be terrible, but I said it anyway. This has come from a listener. It has come from Mark who sent it in via LinkedIn, and he said, plenty of stocks are going ex dividend at the moment, which is something that we talk about a fair bit on the show, isn't it? What exactly does it mean? And I'm guessing this is probably the heart of what he wants to know. Is it better to buy before or after the date they trade ex dividend?

Welcome to Ask Fear and Greed, where we answer questions about business, investing, economics, politics, and more. I'm Michael Thompson, and hello, Sean Aylmer. Hi, Michael, got a good one for you today. They're all good, They're all good, but today is a good one, especially for anyone who's interested in investing. Invested in investing. I was about to say, and then I realized that would be terrible, but I said it anyway. This has come from a listener. It has come from Mark who sent it in via LinkedIn, and he said, plenty of stocks are going ex dividend at the moment, which is something that we talk about a fair bit on the show, isn't it? What exactly does it mean? And I'm guessing this is probably the heart of what he wants to know. Is it better to buy before or after the date they trade ex dividend?

Hmmm? Good question y.

Hmmm? Good question y.

So it's two parts, it's a two parter.

So it's two parts, it's a two parter.

Yes, So the ex dividend date is the cut off date for investors to buy share with an entire molement to a dividend, an upcoming dividend. Let's take a step back at half year and your results companies outline their dividends. It's basically the amount that a company pays two shareholders the amount out of profit they pay to shareholders. That's easy enough. Home Wealth Bank, let's use them for an example. Their interim dividend. The interim dividend is the half year dividend. The final dividend is the fully dividend. So the interim dividend for common Wealth Bank two dollars twenty five. They report it on the twelfth of February. They said, we're going ex dividend on the nineteenth of February. So if you bought Commonwealth Bank shares up until the eighteenth of February, you would get that two dollars twenty five dividend. If you bought it on the nineteenth, you would not get the two dollars twenty five dividend. So okay, so that's what So what you would imagine the nineteenth is Commonwealth Bank shares should go down though training about one hundred and sixty two dollars at the time, so when they open that day you can expect them to go down two dollars twenty five because that's the dividend payment per share. And if you bought them the day before you're going to get it. You buy them today you don't, So the share price reflects that two dollars twenty five. Now on that day Commonwealth Bank share price for me, the trading day of the nineteenth actually went down more than three dollars, but that was two dollars twenty five of that was dividend. The other buck or so was just the view of Commonwealth Bank on the day to day. Okay. So in short, to answer the question of mark, it shouldn't matter that much whether you buy before or after xdiv date because the share price reflects that dividend. Some of the Commonwealth Bank example, the two dollars twenty five the interim dividend they were paying was built into the hut and sixty two dollars share price, and like the following day it was two dollars twenty five lower, and it's actually more lower because the other stuff was going on. But all things being equal, on next dividend day it drops the amount of the dividend.

Yes, So the ex dividend date is the cut off date for investors to buy share with an entire molement to a dividend, an upcoming dividend. Let's take a step back at half year and your results companies outline their dividends. It's basically the amount that a company pays two shareholders the amount out of profit they pay to shareholders. That's easy enough. Home Wealth Bank, let's use them for an example. Their interim dividend. The interim dividend is the half year dividend. The final dividend is the fully dividend. So the interim dividend for common Wealth Bank two dollars twenty five. They report it on the twelfth of February. They said, we're going ex dividend on the nineteenth of February. So if you bought Commonwealth Bank shares up until the eighteenth of February, you would get that two dollars twenty five dividend. If you bought it on the nineteenth, you would not get the two dollars twenty five dividend. So okay, so that's what So what you would imagine the nineteenth is Commonwealth Bank shares should go down though training about one hundred and sixty two dollars at the time, so when they open that day you can expect them to go down two dollars twenty five because that's the dividend payment per share. And if you bought them the day before you're going to get it. You buy them today you don't, So the share price reflects that two dollars twenty five. Now on that day Commonwealth Bank share price for me, the trading day of the nineteenth actually went down more than three dollars, but that was two dollars twenty five of that was dividend. The other buck or so was just the view of Commonwealth Bank on the day to day. Okay. So in short, to answer the question of mark, it shouldn't matter that much whether you buy before or after xdiv date because the share price reflects that dividend. Some of the Commonwealth Bank example, the two dollars twenty five the interim dividend they were paying was built into the hut and sixty two dollars share price, and like the following day it was two dollars twenty five lower, and it's actually more lower because the other stuff was going on. But all things being equal, on next dividend day it drops the amount of the dividend.

Okay. So does that mean then that you do have people buying in just before with the sole purpose of receiving that dividend, or does it generally not happen that way.

Okay. So does that mean then that you do have people buying in just before with the sole purpose of receiving that dividend, or does it generally not happen that way.

Theoretically, it shouldn't matter because if you sell out a week later, you're going to be lost the money. Now, having said that, and this, we're going above my pay grade here. Financial planners. This is where they are fantastic. Go and see a financial planner. Right, well said, But a couple of caveats. Because we have a system of dividend franking in Australia, Companies fully frank their evidence a Commonwealth bank. When you earn money in Australia, you can fully frank it. What that means is that the company has already paid tax on the earnings, so when the shareholder gets a dividend, they actually get a tax credit. They're not double paying it. That can be used to offset your own personal income tax. There may be times when having those franking credits is advantageous to an individual.

Theoretically, it shouldn't matter because if you sell out a week later, you're going to be lost the money. Now, having said that, and this, we're going above my pay grade here. Financial planners. This is where they are fantastic. Go and see a financial planner. Right, well said, But a couple of caveats. Because we have a system of dividend franking in Australia, Companies fully frank their evidence a Commonwealth bank. When you earn money in Australia, you can fully frank it. What that means is that the company has already paid tax on the earnings, so when the shareholder gets a dividend, they actually get a tax credit. They're not double paying it. That can be used to offset your own personal income tax. There may be times when having those franking credits is advantageous to an individual.

Gotcha.

Gotcha.

I'm not saying it is or isn't. I'm saying, see a financial planner.

I'm not saying it is or isn't. I'm saying, see a financial planner.

But it may be the case that there are You may see some people buying those shares in order to access.

But it may be the case that there are You may see some people buying those shares in order to access.

The frank credits. Okay, yeah, And the other thing just remember is that companies. You think that Telstra in the banks will always pay dividends. They don't. During COVID, some of the banks didn't pay dividends for a half year period, so you can't be sure that you're going to get a dividends.

The frank credits. Okay, yeah, And the other thing just remember is that companies. You think that Telstra in the banks will always pay dividends. They don't. During COVID, some of the banks didn't pay dividends for a half year period, so you can't be sure that you're going to get a dividends.

That's really interesting stuff. And I mean we talk about ex dividends so often. Why are you laughing at because a surprise.

That's really interesting stuff. And I mean we talk about ex dividends so often. Why are you laughing at because a surprise.

You're like, that's actually interesting.

You're like, that's actually interesting.

I knew it was going to be interesting, Like everything you say is interesting, but there are some times when you surprise me with just how interesting it was in fact that I know what I'm talking about.

I knew it was going to be interesting, Like everything you say is interesting, but there are some times when you surprise me with just how interesting it was in fact that I know what I'm talking about.

No, no, no, no is it sometimes no?

No, no, no, no is it sometimes no?

But suddenly, like the franking credits part, that all makes sense because I had always kind of had this assumption that there was a greater number of people buying in advance of the ex dividend date in order to access the dividend. And now suddenly I'll see there is a reason why there might be people doing that. But it would come down to very specific kind of circumstances and tax requirements and all that kind of thing, which is why you should see a financial plan. Absolutely a good one, Sean. Thanks Michael, good one too.

But suddenly, like the franking credits part, that all makes sense because I had always kind of had this assumption that there was a greater number of people buying in advance of the ex dividend date in order to access the dividend. And now suddenly I'll see there is a reason why there might be people doing that. But it would come down to very specific kind of circumstances and tax requirements and all that kind of thing, which is why you should see a financial plan. Absolutely a good one, Sean. Thanks Michael, good one too.

Mark.

Mark.

Thank you for asking a question. If you've got your own question that you would like us to answer, then you can send it on through jump Onto, LinkedIn or Facebook or Instagram, or head to Fear and Greed dot com dot au and send through your question. Will answer it pretty soon. I'm Michael Thompson and this is ask Fear and Greed

Thank you for asking a question. If you've got your own question that you would like us to answer, then you can send it on through jump Onto, LinkedIn or Facebook or Instagram, or head to Fear and Greed dot com dot au and send through your question. Will answer it pretty soon. I'm Michael Thompson and this is ask Fear and Greed