Comments on: Dividend Capture Strategy

By: Dividend capture | Marcpilkington

Dividend capture | Marcpilkington — Fri, 27 May 2011 21:51:23 +0000

[...] Dividend Capture Strategy | WhereDoesAllMyMoneyGo.comThe dividend capture strategy is fairly simple, but is not without its drawbacks. First let’s explain what it is. As you may know, there are many companies that … I once wrote an article about dividend capture strategy where I said that it is the illusion of getting something (dividend) for nothing.. [...]

By: Sam Viera

Sam Viera — Tue, 22 Feb 2011 15:53:34 +0000

Hi – Thanks for your Post. Are you speaking from experience? Have you received dividends this way? Most people seem to dissagree with selling at EOD before the ex- dividend date and and get any dividneds. It would be awasome if you could.

Thanks,

By: Steve

Steve — Thu, 26 Aug 2010 18:22:19 +0000

I just had a friend call about this very issue. He wanted to buy puts just prior to the ex-date. The stock was at 28.80 and with a month remaining, the put 25 stike options were $.70…the special dividend is $8. The stock could fall to $22 after ex, and those options could then be worth $3. Something for nothing? Always makes we wonder when it seems that easy :-o

By: pcroscia

pcroscia — Sat, 10 Apr 2010 04:40:53 +0000

Dividend capture strategies don’t work effectively, the institutional investors can benefit because they have more money to invest

Here’s a strategy that might work daily with the idea of not recieving a dividend. This strategy has many possibilities for winning and recovering potential losses.

Buy a put before market close prior to market close and exdiv date. The put price should be close to the current price and have a premium close to the div amt and the dividend should be at least 1% plus greater than 0.20. The next day the stock will automatically drop by the div amt and more. Most cases the stock drops more than the dividend. Here you want to buy the stock then exercise the put. Check VZ and T. Investing is about win loss ratios and managing risk.

Remember there are two ways to recieve money from a put you can exercise it or just sell it. In the event the stock does not drop below the dividend amt the selling of the put will amt to losing very little money.

If you are in a losing situation then you have another choice you can setup a collar since the put already exists and hope for a move upwards and your downside will already be protected.

If you do get the stock below the dividend amt you can buy and sell the stock as it moves up and down throughout the day then sell the put or exersize it.

By: Dividendium

Dividendium — Tue, 30 Mar 2010 19:02:45 +0000

@Perry Brown – I’m not sure how a program could determine if a stock did not move in price surrounding it’s ex-dividend dates. Generally the amount of the dividend payout is less than the daily price gyration of the stock, so the one cannot be distinguished from the other.

But one way to hedge this strategy and reduce the risk some is to use covered calls with your dividend capture. Here’s a service that finds the most profitable covered call dividend capture trades each day:
http://www.dividendium.com/PremiumServices_InflatableDividends.aspx

By: TOM

TOM — Tue, 13 Oct 2009 13:12:53 +0000

THE KEY IS TO SELL THE DAY BEFORE THE EX-DATE (EOD). THE LARGE MAJORITY OF THE TIME, YOU’LL STILL RECEIVE THE DIVIDEND AND YOU GET THE INCREASE IN SHARE PRICE.

By: Perry Brown

Perry Brown — Fri, 02 Oct 2009 15:43:36 +0000

Is it true that the reason a stock price enjoys a runup in price, the days before an ex-dividend day, are mostly because of funds and institutional investors purchasing the stocks for their ” dividend capture portfolios” and then the stock price falls later as they sell the stock to move their money into another dividend play. If so, anyone know of a stock forcaster program that tracks stocks that typicaly do not move in price surrounding their dividend payments?

By: Patrick

Patrick — Wed, 23 Sep 2009 14:18:01 +0000

@RM – perhaps I owe you an apology. Your argument is more subtle than I realized, and is based on the difference in taxation between dividends and capital gains. I still believe arbitrage will eat any profit you hope to make, but the point can’t be made using the “what moron” argument I used in my last reply.

By: Patrick

Patrick — Tue, 22 Sep 2009 17:16:18 +0000

No, it doesn’t make sense. Someone must be on the other side of those trades. What moron will sell it to you at the low price, then buy it at the higher price?

By: RM

RM — Tue, 22 Sep 2009 15:40:55 +0000

What about this?

In a bullish market, choose an undervalued stock (low P/E) with a very high dividend (6-15%)… purchase about a month or two prior to the ex-div date.

The stock should run-up with the anticipation of the dividend.

Sell prior to the ex-div date, capture any run-up profit and avoid the tax on the dividend.

Not saying this is going to happen all the time, but it makes sense right?