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Author: JimLuckett Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 77235  
Subject: Re: ex-dividend date Date: 1/16/2012 9:46 AM
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EMFreak -- Dividends are like sex in marriage without the possibility of pre-marital sex or extra-marital sex and with a spouse who always schedules sex in advance. When you marry a stock, you get none of the dividends (sex) promised or delivered before the marriage and regular dividends (sex) after marriage unless and until the company (spouse) suspends dividend payments (sex) or dies or you sell (divorce) it.

The ex-dividend date is like a promise to have sex on a particular future date. If you marry a stock between the time it has promised to have sex, er, pay a dividend, and when it actually does, then it's going to have its first intercourse with its old spouse not with you. After that little encore with the old spouse, you get the rest. Perhaps you've heard of this happening as an exception in the matrimonial realm. With stocks bought (married) between the ex dividend date (sex promised date) and the dividend payment date (actual tryst date) it is the norm. Stocks are sluts in that way, but paradoxically it's an act of loyalty, keeping a promise made even though circumstances have changed.

Now, you might think a good way to have lots of sex, er, get lots of dividends, would be to buy stocks just before the ex-dividend date and sell them right after. But this is like paying for sex. Stocks gradually get more and more excited as the ex-dividend date approaches and this can be seen in a tendency for their price to rise. Then, right after the ex-dividend date passes, there is a sharp drop-off in that excitement which is totally inconsistent with the sex metaphor and I can't think of a way to tie it in. Wait -- It's like the spouse's orgasm happens prematurely, when the promise to have sex in the future has been issued, rather than when the event actually occurs.

Many other factors also excite and unexcite stock prices (insert metaphor extension here) so this tends to mask the influence of the approach and passing of the ex-dividend date, with the result that it may be difficult to verify what I am saying in specific instances. But over many stocks and many ex-dividend dates, the effect on stock prices of the approach and passing of the ex-dividend date is strong and consistent. So, as with patronizing prostitutes, you can have lots of dividend income (sex) by paying for it but it's not going to be satisfying (I imagine, not having myself used the strategy in either realm).

Hope this helps.

Simile Jim
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