There are many people who made a fortune from the money they invested in share markets. Warren Buffet is one of the most well-known names among them that we are all familiar with. Then, he is a billionaire and throws his billions in to purchasing shares. Majority of us will never be in any position to do anything like that. But, we can also make a good return on our investments by doing stock market investments in a smart way. One way to do this is by gaining the dividends from the stocks that we buy. If you have the resources to invest in shares for a short period of time, you can purchase them a day before the dividends are given and then can sell them on the very day the dividend was given. This method is used by a lot of smart people to their benefit.
It is also important to remember ex dividend date to prevent loss. This is the date on which any share purchased or sold is not bound by the right to be paid by the recently declared dividend. Every existing stock holder would receive dividend even if they sell their stock on that day. But on the other hand every buyer who buys share on ex dividend is not entitled to receive dividend. Generally stock price would reduce on ex dividend date exactly equivalent to that of the dividend amount. It is simply not wise to buy shares on ex dividend date. It is better to buy the stock on the previous day to ex dividend. A buyer has to pay tax for the amount received as dividend on the next year. A buyer of stock has to consider his tax to ensure he makes profit. Before entering in to call option a stock holder has to check the record date of registration. Otherwise the buyer may force the stock holder to sell the stock.
Another way of looking at it is that an investment term relating to the payment of dividends by a corporation is also called ex dividend date. The Internal Revenue Service (IRS) defines it as the first business day after the date on which a corporation has declared the date of record for payment of dividends on its stock shares. The importance of this date is the fact that the seller of shares after the ex dividend date but before actual payment of the dividend, is the owner on record for the payment of the stock's declared dividend. So the price of a company's share sold after this date trade is not included.