How to determine date that an ETF must be owned to be eligible for the dividend payment?

External question — Personal Finance Stack Exchange Author: Amazon Dies In Darkness Original post: https://money.stackexchange.com/questions/132097 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. According to Investopedia.com: Similar to an individual company's stock, an ETF sets an ex-dividend date, a record date, and a payment date. These dates determine who receives the dividend and when the dividend gets paid. Source: https://www.investopedia.com/articles/investing/120415/how-dividendpaying-etfs-work.asp Investopedia does not go into great details for ETFs, but that page directly links to another Investopedia page regarding equity dividends, which states: The ex-dividend date or "ex-date" is the day the stock starts trading without the value of its next dividend payment. Typically, the ex-dividend date for a stock is one business day before the record date, meaning that an investor who buys the stock on its ex-dividend date or later will not be eligible to receive the declared dividend. Rather, the dividend payment is made to whoever owned the stock the day before the ex-dividend date. Source: https://www.investopedia.com/terms/e/ex-dividend.asp And yet, when looking at the prospectus for the popular SPDR DIA ETF (which tracks the Dow Jones Industrial Average, DJIA), it seems to state just the opposite: The regular monthly ex-dividend date for Units is the third (3rd) Friday in each calendar month, unless such day is not a Business Day, in which case the ex-dividend date is the immediately preceding Business Day (“Ex-Dividend Date”). Beneficial Owners reflected on the records of DTC and the DTC Participants on the first (1st) Business Day following the Ex-Dividend Date (“Record Date”) are entitled to receive an amount representing dividends accumulated on Portfolio Securities through the monthly dividend period which ends on the Business Day preceding such Ex-Dividend Date (including stocks with ex-dividend dates falling within such monthly dividend period), net of fees and expenses, accrued daily for such period. ... The payment of dividends is made on the Monday preceding the third (3rd) Friday of the next calendar month... Source: SPDR DIA ETF Trust Prospectus (2020), page 61 (emphasis added) https://www.ssga.com/library-content/products/fund-docs/etfs/us/ps/DIA_PROSPECTUS.pdf It sounds like SPDR DIA ETF does not pay any dividends to fund owners who own the ETF on the day before the ex-dividend date, contrary to Investopedia. Furthermore, it sounds like they only pay dividends to fund owners who own the fund the day after the ex-dividend date, which seems completely backwards. What's going on here? Does this ETF break typical conventions, or is this common? Perhaps there a fundamental principle missing from this analysis? How would one be aware of this without wading through the entire 80 page prospectus?

External answer — Personal Finance Stack Exchange Author: Richard at NorgateData Original post: https://money.stackexchange.com/a/132099 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. It is really quite simple for this and other corporate actions - and not just for ETFs. You need to be holding at the close of the day prior to the ex-date. You can buy at this time at or before this, but you must be holding as of the close. If you buy it any time after that, you will not be entitled to the dividend. The "ex" part of ex-dividend means "excluding". The "record date" is simply an accounting exercise reflecting transfer and settlement of the security into your name, and is entirely irrelevant to you (your broker handles all of this transparently). Looking at a recent dividend for SPY: Ex-date Sep 18 2020 Amount $1.339224 Day prior to ex-date: Sep 17 2020 Payment date: 30 Sep 2020 So you must have bought on or before the close during regularly trading hours to receive this dividend. If you wish, You could certainly sell the stock on Sep 18 and you will still receive the dividend. Note: The exact amount of the dividend is not known until after the close on 18th, prior to the next trading day open. Cheers, Richard.