When investing, we think you will profit more from focusing on companies that have maintained or raised their dividends during both recessions and stock market downturns. Our investment advice for beyond a dividend capture strategy But the average investor has little chance of making a significant profit.
They may also have tax benefits, particularly for corporations. In the end, a dividend-capture strategy may only really have appeal for securities dealers or brokers who are executing huge trades with very low transaction costs. In fact, they may even exceed the dividend income. The commissions can eat up much of the dividend income. However, you have to pay a brokerage commission to buy the shares, and a commission to sell. Of course, any strategy that involves buying shares can pay off when stock markets are rising. In theory, this can pay off when stock markets are rising. At this point, you sell the stock for a break-even trade. Because the stock falls by the amount of the dividend on the ex-dividend date, the strategy then calls for you to wait for the stock to move back to the price where you bought it before the ex-dividend date. To do this, you would buy a stock just before the ex-dividend date, so that you would be a shareholder of record on the record date, and would receive the dividend.
If you can sell it for as much as you paid for it, you have “captured” the dividend at no cost, other than the transaction costs. Dividends can produce as much as a quarter of your total return over long periods.Ī “dividend capture” strategy is a trading technique of buying a stock just before the dividend is paid, holding it just long enough to collect the dividend, then selling it.
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