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Understanding Financial Statements Income Statement Analysis Balance Sheet Analysis Cash Flow Analysis Shareholders' Equity Analysis Ratios and Definitions

Shareholders’ Equity Analysis

 - Are the stockholders really

 - Do you know where your
    equity dollars are?

 - How comprehensive income
    can affect stock values

 - Watch out for your dividends
 - Stock splits, dividends
    and reverse splits

 - Spin-offs, tracking stocks
    and determining new cost

 - Stock rights give board of
    directors more power then
    they are entitled to



Watch out for your dividends

I knew an investor who transferred her no-load mutual fund to her brokerage account, at a very reputable firm, so that all her investments would be on one statement. After a few years, she noticed that the balance of that particular fund never grew, while the fund was always listed in the newspapers as one of the better performers in its group. To keep the story short, the brokerage house was not posting the annual stock dividends of that fund to her account. When she discovered it, the firm researched it and immediately made her whole. Mistakes sometimes happen and can be easily rectified, but it’s important for investors to personally review their monthly statements. I hope this example brings home the importance of reviewing your statements.

Most investors, especially those with many stocks, don’t focus on specific stock dividends until they do their taxes. While most individuals are astute as to annual dividend amounts, many may not be aware of the implications of all the various dividend dates. This may cause them to innocently lose money, by trading shares and not realizing when the next ex-dividend date is.

Even experienced investors sell stocks immediately before the ex-dividend date, thereby losing the dividend. In effect, they are giving the dividend away to the buyer. In reality, the dividend may or may not be built into the stock price.

Most brokerage statements show when a dividend was received, and what the anticipated income and yield will be on the shares held. Most statements don’t show ex-dividend dates, nor do many annual reports or company web sites. One needs to read the actual press releases issued by the company. The Value Line Investment Survey shows dividend information in fine print on the very bottom of each page. Some stock sheets disclose an “X” by the particular stock’s volume figures, if the stock is trading ex-dividend. Yahoo does a very nice job of reporting dividend payment dates and ex-dividend dates under their key statistics section. Additionally, certain stock price/volume charts show a very small tick mark on the bottom date axis, which represents ex-dividend dates. 

The important cash dividend dates are listed below:

Declaration date – The date the dividend is authorized by the board of directors and announced in a press release, usually over the business wire. The company notifies the exchanges, as well as the transfer agent (paying agent) and depository trust company (“DTC”), of the declaration date, record date, payment date and amount.

Date of record – The date on which the investors must be shareholders to qualify for the dividend. Keep in mind that the brokerage firms need three days to settle the trade. To qualify as a shareholder on the record date, one must purchase the stock at least three days before the record date. The record date is also the cut-off date for determination of rights to receive proxy materials, annual reports and the like.

Ex-dividend date – The date that the new investors are not eligible for the dividend. The prior owner of the stock, who owned the stock immediately prior to the ex-dividend date, receives the dividend. If one purchases a stock on or after the ex-dividend date, they will not receive the cut-off dividend. The stock exchange sets the ex-dividend date usually two business days prior to the record date. 

Dividend payment date – The date the investors are paid. The company wires the total dividend payment, beforehand, to the transfer agent, who then disburses the dividends to the individual shareholders of record, as well as to the DTC. The DTC then forwards the dividend to the brokerage firms who hold the investors’ shares in street name. The brokerage firms then credit the individuals’ accounts.  

On the website of Duke Energy under “Investors – Shareholder Return,” they present a simple but excellent chart, listing all the important dates and amounts of their dividends. Hopefully, the ongoing accounting reform will make this type of disclosure a requirement for all companies.




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