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The good news is dividends. The total for our Foolish Four portfolio down there has been running about 60 bucks shy of the total in my portfolio account. I just realized, I'd forgotten to add in the dividends. Usually I do that once a quarter, but I've been neglectful -- which I don't mind because then you get these nice surprises (apologies to all the accountant-types who are reading this and squirming).
Today we added $60.40 to the cash in the Foolish Four portfolio. The cash came in as follows.
I've listed the dates the dividends were actually paid, but I could have used the ex-dividend date that is usually quoted when looking for "dividend date." The whole dividend dating thing is rather convoluted.
Here's the process in a nutshell: Each quarter, the board of directors (BOD) meets and declares a dividend. This is always a formal action. Even if the company has been paying the same dividend for years, it's not official until the BOD says so. When they declare the dividend, they also set the holders-of record date and the payable date.
The holders-of-record date is the date on which you have to actually own the stock to receive the dividend. If you sell a stock after that date, you will still get a check for the dividend on the payable date, which is when the money shows up in your account or mailbox.
But, things are never that easy. When you buy a stock, the trade takes three days to settle. So, if you buy a stock the day before the record date, your trade will not have settled in time for you to be a bona fide holder-of-record on the record date. Darn it, you don't get that dividend -- the guy who sold you the stock gets it because his trade hasn't settled yet either.
To keep people from coming to blows in their offices, the stock exchanges have established the ex-dividend date. This is actually the one that counts (although the declaration date has a particular significance for Foolish Four investors that I will explain later). The ex-dividend date, often called the ex-date for short, is the day on which a stock starts to trade without its dividend "attached." If you buy on or after the ex date, you don't get the dividend.
The ex-dividend date is usually two days before the record date. Therefore, any trade that took place on the day before the ex-date will clear by the record date.
As I said, although I listed the payable dates above, I could just as easily have listed the ex-dates. It's perfectly legitimate to count the dividend as paid on the ex-date, since you are assured of receiving it if you owned the stock on that date. Our Dow Dividend Spreadsheet and most other research tools will always use the ex-date when accounting for dividends.
But, we use the declaration date to calculate the yields we use to pick our Foolish Four stocks. The declaration date is the day that the dividend is released to the public and, incidentally, that's when it is incorporated into the yields quoted by most stock quote services as well. When a dividend changes, that information is immediately incorporated into the value assessment of the stock, because that is the amount that any new purchaser can expect to receive and that anyone contemplating selling would expect to give up.
So, when we calculate the yield figure that goes into our Foolish Four numbers, we always use the most recently declared dividend (and multiply it by 4 to annualize it). The future yield of a stock is more likely to be that figure than it is to be based on the old dividend number. When a change is dramatic, we want that information incorporated into the Foolish Four as soon as possible.
For example, just last week Caterpillar declared a dividend (on June 14, the day after Barbara Bayer wrote a review of CAT, wouldn't you know it)! Lo and behold, this dragged-down titan increased its dividend from $0.325 to $0.34, a 4.6% increase. I was excited. Companies don't increase dividends unless they see strong financial performance in the year ahead.
The investing public yawned. What can you do?
Fool on and prosper!
Stock Dividend Paid
General Motors <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GM)") else Response.Write("(NYSE: GM)") end if %> $9.00 March 10
$9.00 June 12
JP Morgan <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JPM)") else Response.Write("(NYSE: JPM)") end if %> $9.00 January 17
$9.00 April 13
Kodak <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: EK)") else Response.Write("(NYSE: EK)") end if %> $8.80 April 3
Caterpillar <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CAT)") else Response.Write("(NYSE: CAT)") end if %> $7.80 Feb. 21
$7.80 May 22