Stock markets and dividends: When exactly does one need to own shares to be entitled to the dividend?

Question

I have a more or less formal question regarding dividends.

If a company pays an (annual) dividend of - say - 5%, this is voted for/against on the annual general meeting. Now, the dividend is paid out to all shareholders that own stock. The day after the annual general meeting, the shares of that company are traded "ex-dividend", meaning the assumed 5% lower. This all is clear to me and logical.

What I am uncertain about is when EXACTLY one has to own shares in order to be paid the dividend.

In other words: what happens if I buy - or sell - shares on the day of the annual general meeting?

Let's pick an example: SAP (Germany) have their annual general meeting today (15. May). Assume I own 1 share (approx 112€ right now). They'll pay a dividend of 1,50€ per share. So ex-dividend, the price per share will drop to 110,50€ (ignoring all other market factors).

Now, SAP's website states that "dividends are remitted without delay after the resolution on the appropriation of retained earnings, usually on the third business day after the Annual General Meeting. All shareholders possessing SAP certificates at the time of the resolution on the appropriation of retained earnings are entitled to receive payment of the dividend." https://www.sap.com/corporate/en/investors/stock/dividends-and-share-buyback.html

The German original of this section reads "Dividendenberechtigt sind alle Aktionäre, die bei Beschlussfassung der Hauptversammlung über die Gewinnverwendung SAP-Aktien besitzen.": https://www.sap.com/corporate/de/investors/stock/dividends-and-share-buyback.html Explicitly, if you own shares at the time the decision is made to pay a dividend, you are entitled to it. End of story.

So, to summarize:

• Date of resolution = annual general meeting = 15. May
• Date shares are traded ex dividend = 16. May
• Remission of dividends (payout day) = 15. May + approx. 3 days = 18. May

Does this technically mean you could buy SAP shares on May 15th, sell them in the evening the same day, hence are entitled to the dividend since you owned the shares "at the time of resolution of the appropriation", yet not suffer the ex dividend share prices.

Can't be, right?

So hence my question: How does this work - EXACTLY?

Answer 1

According to yahoo finance the ex-dividend date is 2019-05-16.

Here is the definition of Ex-dividend date from the SEC)(pulled 15 May 2019):

To determine whether you should get a dividend, you need to look at two important dates. They are the "record date" or "date of record" and the "ex-dividend date" or "ex-date."

When a company declares a dividend, it sets a record date when you must be on the company's books as a shareholder to receive the dividend. Companies also use this date to determine who is sent proxy statements, financial reports, and other information.

Once the company sets the record date, the ex-dividend date is set based on stock exchange rules. The ex-dividend date for stocks is usually set one business day 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.

The linked document discusses weekend, and holidays involved in the calculation.

The difference between the record date and the ex-dividend is to allow for settlement.

Answer 2

So, to summarize:

Date of resolution = annual general meeting = 15. May Date shares are traded ex dividend = 16. May Remission of dividends (payout day) = 15. May + approx. 3 days = 18. May Does this technically mean you could buy SAP shares on May 15th, sell them in the evening the same day, hence are entitled to the dividend since you owned the shares "at the time of resolution of the appropriation", yet not suffer the ex dividend share prices.

Can't be, right?

This is not correct.

You must own the stock on the ex-dividend date to be entitled to it. Share price will be reduced by the amount of the dividend. They giveth, they take away :->)