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Get Started in Shares by Glen Arnold

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Don’t worry about sharp share moves on ex-div day

Novice investors can get caught out by the apparent weird movements in share prices on ex-dividend days – they seem to plummet. But that is just the logical consequence of any new buyer losing the right to receive dividend income a few weeks hence.

If a share is currently cum-dividend any buyer today will receive the dividend of, say, 12p in six weeks. The share might therefore be trading at, say, 300p. If the following day it goes ex-dividend and is then sold, the seller will be the person on the share register on the record day and so will receive the dividend. Thus the new buyer will pay around 300p minus 12p for the shares, assuming all else remains constant.

So, do not be panicked into thinking ...

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