Knowing the ins and outs of the dividend calendar is an important part of dividend investing

Dividend stocks are an essential part of a good conservative investing philosophy. But there are certain details you should know about the way dividends are paid out. One of the key details on the dividend calendar is the ex-dividend date.

The ex-dividend date is two business days before the record date when the shares begin to trade without their dividend. If you buy stocks one day or more before their ex-dividend date, you will still get the dividend. That’s when a stock is said to trade cum-dividend. If you buy on the ex-dividend date or later, you won’t get the dividend. The ex-dividend date is in place to allow pending stock trades to settle.

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Important dates for your dividend calendar

The declaration date: Several weeks in advance of a dividend payment, a company’s board of directors sets the amount and timing of the proposed payment. The date of that announcement is known as the declaration date.

The payable date: The payable date is the date set by the board on which the dividend will actually be paid out to shareholders.

The record date: Only shareholders who hold the shares before the payable date will receive the dividend payment. That date is known as the record date, and is set any number of weeks before the payable date.

Dividend calendar themes: A history of paying a dividend

One of the best ways of picking a quality dividend stocks is to look for companies that have been paying dividends for at least 5 to 10 years. Companies can trump up quarterly earnings, issue press releases to appear to be making strong progress, but they cannot fake dividends. Dividends are cash outlays that an unsuccessful company could never produce. A history of dividend payments is one thing that all the best dividend stocks have in common.

Bonus Tip: Dividend calendar: How to decide if an ex-dividend date can be used in your investing strategy

“Dividend capture” is the trading technique of buying dividend stocks just before the dividend is paid, holding it just long enough to collect the dividend, then selling it. If you can sell it for as much as you paid for it, you have “captured” the dividend at no cost, other than the transaction costs.

To do this, you would buy shares in stocks just before the ex-dividend date, so you would be a shareholder of record on the record date, and would receive the dividend. Because the stock falls by the amount of the dividend on the ex-dividend date, the strategy then calls for you to wait for the stock to move back to the price where you bought it before the ex-dividend date. At this point, you sell the stock for a break-even trade.

This strategy may be of interest to some investors, including security investors or brokers who can execute major trades with very low transaction fees. Corporations may even have tax benefits.

Ex-dividend dates can particularly pay off for these types of investors when markets are rising.

Although there can be value to some investors, you have to pay a brokerage commission to buy the shares, and a commission to sell. The commissions can eat up much of the dividend income, or even exceed the dividend income.

Unfortunately, the average investor doesn’t have much chance of making a significant profit.

How to spot the highest-quality dividend-paying stocks

We look for Canadian dividend stocks that have industry prominence, if not dominance. Our reasoning, besides brand recognition, is that major companies can influence legislation, industry trends, etc. to suit themselves. Minor firms can’t do that.

We think investors will profit most—and with the least risk—by buying shares of well-established, dividend-paying stocks with strong business prospects.

The best firms also have rising sales and profits and sound balance sheets, as well as a strong hold on a growing market. Additionally, they have strong management that will make the right moves to remain competitive in a changing marketplace.

Those are the kinds of stocks we recommend in our newsletters and investment services.

Are you watching your dividend calendar closely? Has doing so helped in your dividend investing strategy? Share your thoughts with us in the comments.