401k question on company stock and dividends

[osaMABUSh]

I have some of my 401k invested in my company's stock. My question is do dividend dates within a 401k follow the normal stock market timing rules of determining if you get the dividend? Here's the details: my company stock declared a dividend to be payable on 10/24/08 for shareholders of record 10/13 (Monday Holiday) with an ex-dividend date of 10/8. I bought 2,000 shares on 10/7 (in-dividend) and sold 1,400 shares on 10/10. On 10/24 I expected to receive dividends for 2,000 shares yet only received dividends for 600 shares.

This doesn't follow the normal rules. <http://www.investopedia.com/articles/02/110802.asp>

"Ex-dividend date– On (or after) this date the security trades without its dividend. If you buy a dividend paying stock one day before the ex-dividend you will still get the dividend, but if you buy on the ex-dividend date, you won't get the dividend. Conversely, if you want to sell a stock and still receive a dividend that has been declared you need to sell on (or after) the ex-dividend day. The ex-date is the second business day before the date of record."

Is a 401k different in determing dividend payouts? I don't think this matters but I receive dividends via pass thru as a check to me treated as taxable income rather than re-invested in my 401k.

[RB TexLa]

1. Did you receive a discount on the price as an employee? Were matching funds used.

Both of those could have rules in place that could affect dividends payable. Only thing I can think of that would change what you expected.

Seems odd but I don't deal with 401(k)s very much.

[Rabrrrrrr]

2. I think what might have happened is that, because of the long weekend,

and computers doing stuff even when the market is closed, your ownership "timed out" by the time the date of record popped up.

Assuming that it normally can take 3 days for a company to know if someone bought or sold a stock (which is why there is that ex-dividend day before the date of record), generally you're safe to sell the stock a day or two before the date of record.

I think in your case, though, the "generally you're safe" maxim didn't pan out, and your ownership of the stocks DID transfer out of the company's records before the date of record because you sold them not the typical one or two days before the DOR, but 3 days before the DOR (because DOR was a Monday, and Friday was the latest you could sell).

[RB TexLa]

3. Understand tiredness.

:)

[A HERETIC I AM]

5. Not neccessarily, Rabrrrrr

I think what might have happened is that, because of the long weekend, and computers doing stuff even when the market is closed, your ownership "timed out" by the time the date of record popped up.

Assuming that it normally can take 3 days for a company to know if someone bought or sold a stock (which is why there is that ex-dividend day before the date of record), generally you're safe to sell the stock a day or two before the date of record.

The three day settlement rule is a bit of a throwback to the old days, when it actually did take time for such records to be updated. While the "sale plus 3" rule still applies, in these days of electronic trading, knowledge of who bought and sold what and when is basically instantaneous.

Trades don't technically "settle" for 3 days, but time and price is known immediately. You buy it at 9:45 AM on Monday and sell it at 12:00 that same day, you bought and sold it even though the trades don't settle for another 72 hours. Trades don't get "timed out" in the way you seem to suggest. The OP sold them on the day after the Ex date but before the record date. That's it. He's SOL re: the div.

[osaMABUSh]

8. So "Heretic I am"

are you saying I have to buy before the ex-dividend Date AND hold onto through the Record Date? Even though all I read says you can sell bt. the ex-dividend and Record Date and still get the dividend? (see <http://www.investopedia.com/articles/02/110802.asp>)

I am OK with holding on but I would like my company to tell me such so that next quarter I'll be sure to hold on to get all the dividends. (Since I take it as a taxable earnings in a check it is a nice 'quarterly bonus' to myself that I look forward to)

[A HERETIC I AM]

9. The record date is what determines WHO gets the dividend.

"are you saying I have to buy before the ex-dividend Date AND hold onto through the Record Date? Even though all I read says you can sell bt. the ex-dividend and Record Date and still get the dividend?"

Yes, that's exactly what I am saying and exactly what the article you linked says. All your reading does NOT say you can sell before the record date and still be entitled to the dividend.

* Declaration date– This is the date on which the board of directors announces to shareholders and the market as a whole that the company will pay a dividend.
* Ex-date or Ex-dividend date– On (or after) this date the security trades without its dividend. If you buy a dividend paying stock one day before the ex-dividend you will still get the dividend, but if you buy on the ex-dividend date, you won't get the dividend. Conversely, if you want to sell a stock and still receive a dividend that has been declared you need to sell on (or after) the ex-dividend day. The ex-date is the second business day before the date of record.
* Date of record– This is the date on which the company looks at its records to see who the shareholders of the company are. An investor must be listed as a holder of record to ensure the right of a dividend payout.
* Date of payment (payable date) – This is the date the company mails out the dividend to the holder of record. This date is generally a week or more after the date of record so that the company has sufficient time to ensure that it accurately pays all those who are entitled.

Your answer is in bold and underlined.

If you sold before the record date, you are NOT a shareholder of record.

[A HERETIC I AM]

10. One other thing. October 13 was not a Stock Market Holiday.

It was a Bond Market Holiday, but the NYSE and other Stock Exchanges were open.

Only the Bond Markets were closed on 10/13.

[osaMABUSh]

11. The ex-div and record dates are in conflict then

because it also says "if you want to sell a stock and still receive a dividend that has been declared you need to sell on (or after) the ex-dividend day."

[A HERETIC I AM]

12. I beg your pardon. I am wrong. Forgive me.

My apologies.

This Wikipedia entry explains it a little better;
http://en.wikipedia.org/wiki/Ex-dividend

I have been laboring under a misapprehension.

I'll call a friend of mine who works on a trading desk on Monday to ensure I have a more complete grasp.

The way I understood it was that the record date determined who was entitled to it because the ex date is set by the exchange, not by the issuer of the stock. If you bought before the ex date then based on the trade + 3 rule, you would have been a shareholder of record for all of your 2000 shares.

Again, I'm sorry I was wrong.

[osaMABUSh]

6. Yes, the long weekend is the best explanation so far

Get this, I called my company's '401k specialist' and they opened a 'case'. After three days they told me that the sae was closed and the amount I got was correct with no explanation. So I asked why it was correct and put me on hold for 10 minutes then said because it was 3rd quarter earnings it was based on what I held on Sept. 30th!!! Which, of course, is totally wrong and made no sense. After I explained ex-dividend date, etc. to the 401k specialist I left them with this: "go back and find someone who can answer the question on what date did I need to own the stock to get the dividend?" I am not holding my breath.

So if the 'long weekend' theory is true then there are many shares I guess (in additon to mine) that no dividend was paid. Is this possible? Don't the books have to balance in that the company pays out dividends for every outstanding share?

[A HERETIC I AM]

7. The long weekend is immaterial.

Dividends are paid to every shareholder of record that owned them prior to the ex date and on the record date. When you sold your 1400 shares on the 10th, someone else bought them. Since they bought them after the ex date, they aren't entitled to the dividend and neither are you because you didn't own them on the record date.

[A HERETIC I AM]

4. Read the article again. On the record date you only held 600 shares.

Only shareholders of record are entitled to the dividend and only for the number of shares they hold on the record date.

To have been entitled to the dividend for the entire 2000 shares, you would have to had held them for another 3 business days.

On edit to add that the fact the shares were held in a 401(K) makes no difference. It's just an account, like an IRA. A tax deferred account, but just an account.