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I just recently bought shares in Lloyds banking group PLC. I'm quite new to this so I don't understand how the dividends work properly.

I hadn't purchased the shares for dividends, just hoping for long term appreciation of the price, though when I searched for dividend payments with the bank they list the coming and previous dividend payments. Though I am unsure what it means, or how to interpret it correctly to see if I will get a dividend.

  • Description: Special 2016
  • Dividend (per share): 0.50p
  • Ex Dividend Date: 06/04/2017
  • Record Date: 07/04/2017
  • Payment Date: 16/05/2017

So I have purchased these shares a few days ago before the Ex dividend date. From what I understand this would mean I have purchased the shares in time, though I don't understand the description, does it mean I had to purchase the shares in 2016?

Here's the link: http://www.lloydsbankinggroup.com/investors/shareholder-info/dividends/

If anyone might be able to help it would be greatly appreciated.

  • Yes i understand this, though my strategy was not in dividend payments. – Bezzzo Mar 10 '17 at 20:23
  • The ex-dividend date is still in the future. – Nathan L Mar 10 '17 at 20:30
  • @Nathan L I've purchased the shares, though i just wasn't sure, because the are saying it's a '2016 special' and the dividend payment is 50p, where as the shares only cost 67p, though keeping in mind the their share price hit rock bottom after the GFC. Maybe trying to entice more investors – Bezzzo Mar 10 '17 at 20:35
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    @Bezzzo: The dividend is not 50p per share, it is 0.50p per share - half a penny per share. – gnasher729 Mar 10 '17 at 23:37
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    Ahh, gnasher729 is on to it! That seems about right! Thank you! – Bezzzo Mar 11 '17 at 14:26
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What is a dividend?

Essentially, for every share of a dividend stock that you own, you are paid a portion of the company’s earnings. You get paid simply for owning the stock!

For example, let’s say Company X pays an annualized dividend of 20 cents per share. Most companies pay dividends quarterly (four times a year), meaning at the end of every business quarter, the company will send a check for 1/4 of 20 cents (or 5 cents) for each share you own. This may not seem like a lot, but when you have built your portfolio up to thousands of shares, and use those dividends to buy more stock in the company, you can make a lot of money over the years. The key is to reinvest those dividends!

Source: http://www.dividend.com/dividend-investing-101/what-are-dividend-stocks/

What is an ex dividend date

Once the company sets the record date, the ex-dividend date is set based on stock exchange rules. The ex-dividend date is usually set for stocks two business days before the record date. If you purchase a stock on its ex-dividend date or after, you will not receive the next dividend payment. Instead, the seller gets the dividend. If you purchase before the ex-dividend date, you get the dividend.

Source: https://www.sec.gov/answers/dividen.htm

That said, as long as you purchased the stock before 6/4/17 you are entitled to the next dividend. If not, you'll get the following one after that.

  • Thank you. I've purchased the stock so i should qualify. I assumed i may get the payment, though something didn't seem to add up, the stock only costs 67p a share, and they are giving 50p a share as a divided. I can accept your answer in 6 minutes and unfortunately i dont have enough rep to upvote. Thanks again – Bezzzo Mar 10 '17 at 20:28
  • Please see: google.com/finance?q=LON%3ALLOY What did you buy for 67p per share?? – chili555 Mar 10 '17 at 21:02
  • @chili555 They are 67p a share. As Gnasha pointed out, the dividend payment is 0.5p. Not 50p. :-) – Bezzzo Mar 11 '17 at 14:36
  • @quid It's priced in Pence sterling (GBX) not GBP. They are 68p a share – Bezzzo Mar 11 '17 at 14:54
  • @Bezzzo, i stand corrected! So the dividend is 0.005 GBP /per share. – quid Mar 12 '17 at 18:09
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Yes, as long as you own the shares before the ex-dividend date you will get the dividends. Depending on your instructions to your broker, you can receive cash dividends or you can have the dividends reinvested in more shares of the company. There are specific Dividend ReInvestment Plans (or DRIPs) if you are after stock growth rather than income from dividend payments.

  • Thanks Nathan, i have opted to receive cash dividends :-) – Bezzzo Mar 10 '17 at 20:36
  • I don't know how gains are taxed in your country but you might look into it. It's possible that getting paid dividends instead of reinvesting them would trigger some kind of capital gains taxes. If you own only a few shares this could be minimal, but if we're talking a lot of shares you could have a hefty tax bill on your hands. – jimmy0x52 Mar 10 '17 at 21:02
  • @jimmy0x52 I've looked into it previously, dividends are taxed as income and the appreciation of the share price is taxed as CGT. Any reinvestment are still taxed as income tax and obviously CGT when i sell the shares. – Bezzzo Mar 11 '17 at 14:20
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gnasher729, was able to see my problem here. It was a silly oversight. It's not 50p a share, its 0.5p a share.

@Bezzzo: The dividend is not 50p per share, it is 0.50p per share - half a penny per share.

Thanks!

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