Ask TheStreet: Dividends

Editor's Note: Ask TheStreet is designed to answer questions about the market, strategies, and investment methods. Please email us to ask a question, but keep in mind that we cannot offer specific investment advice.

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When do you have to purchase a stock in order to get the dividend? -- S.J.

Gregg Greenberg: There are two dates to keep in mind when determining whether you are entitled to a company's stock or cash dividend: the "record date" and the "ex-dividend date."

The record date is when you must be on the company's books as a shareholder to receive the dividend. After the company establishes the record date, the ex-dividend date is normally set for two business days before the record date. (Remember, that's business, not calendar, days.)

If you purchase a stock on or after its ex-dividend date, you will be out of luck when it comes to the dividend payment. So don't dawdle, because if you do the seller will pocket the dividend instead of you.

Also, if a company pays out 20 cents a share every quarter, all other things being equal, the shares would likely open down about 20 cents lower on the ex-dividend date because buyers that day will not receive the income.

The one wrinkle in all of this is that the dividend itself is usually not paid out until two to four weeks after the ex-dividend date. Investors can sell shares any time on or after the ex-dividend date and still receive the payout, even though the stock is no longer in their account.

What happens to the stock of a company that comes out of Chapter 11 bankruptcy? Do you lose all your shares of the company? -- H.A.

Don't be surprised if you see a company's securities continue to trade even after the company has filed for bankruptcy under Chapter 11. In most instances, even when a company is delisted from one of the major stock exchanges, its shares may continue to trade on either the over-the-counter bulletin board or the Pink Sheets. According to the Securities and Exchange Commission, there is no federal law that prohibits trading of securities of companies in bankruptcy.