Investing

Dividend stocks by year end?

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  • Dec 29th, 2015 10:45 am
[OP]
Sr. Member
Jun 27, 2012
913 posts
97 upvotes
Winnipeg, MB

Dividend stocks by year end?

I was recommended to purchase some dividend stocks instead of getting 2-3% at the bank. It was mentioned that one could get the full dividend rate (often 5%) for the whole year I think if one purchased before the end of the year. Is there any truth to that? Or would you get it for the days owned?
4 replies
Penalty Box
Oct 26, 2007
897 posts
96 upvotes
Toronto
A bit confused at op.

Dividend yield can be 5% on dividend stocks like rio can but to buy before end of the year and get full year rate? I'm confused of what u r asking.

You will get the next dividend payment and yes it can 5% yield. Basically it's 5% yield as soon as you buy it but you have to wait for the dividend payment
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Dec 14, 2010
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redflagguy2u wrote: I was recommended to purchase some dividend stocks instead of getting 2-3% at the bank. It was mentioned that one could get the full dividend rate (often 5%) for the whole year I think if one purchased before the end of the year. Is there any truth to that? Or would you get it for the days owned?
It's for the period that you own. Some are paid monthly, some quarterly.

You do know that although you could get a 2% or 3% dividend for the year (if you hold for that period), there is the potential of losing your principal in the short term, right? And depending on what you buy, there's the potential of losing your principal in the long term too.

Make sure to buy what fits your goals and risk tollerance.

Rod
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Mar 8, 2013
2510 posts
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rammingman wrote: A bit confused at op.

Dividend yield can be 5% on dividend stocks like rio can but to buy before end of the year and get full year rate? I'm confused of what u r asking.

You will get the next dividend payment and yes it can 5% yield. Basically it's 5% yield as soon as you buy it but you have to wait for the dividend payment
Riocan is not a good example, because it pays monthly so you will get 5% dividend by 12 each month. Also, it pays a distribution (not an 'eligible dividend' for income tax purposes, which likely was the recommendation). redflagguy2u, you will benefit from understanding the difference between bank interest and a stock before you invest. But the short answer to your questions is no and no.
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Oct 9, 2005
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Some mutual funds pay out distributions (in varying mixes of capital gains, dividends, etc.) annually (e.g. Vanguard in US), so in theory, you could capture most/all of a fund's distribution by owning it for only one day (the ex-dividend date), but also in (efficient market) theory, market/NAV prices build in future distributions as part of the value, so as the the ex-dividend date comes and goes, the price you pay reflects the market's valuation with and without the impending distribution.

Note that receiving a distribution, in a taxable account, also means you get the tax bill for the distribution, regardless if you held the stock for 1 day or the whole year. In a way, you are paying the bill for whoever benefited from the un/realized capital gains through the year.

More on dates/timing at: http://www.investopedia.com/university/ ... -dates.asp

The above posters mention of basic financial market knowledge, short- and long-term (equity) risk, and dividends vs. other distributions are also notable. Adding to their thoughts, capital gains distributions may actually be tax-preferred over eligible dividends at higher marginal tax rates and/or with realized capital losses to utilize.

Also, it's likely too late to perform this maneuver for the year, as I believe all distributions have been declared with dates before the nearing calendar month/year-end.
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