Comments on: Dividend Capture Strategy

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?

By: FearLES

FearLES — Wed, 11 Mar 2009 17:16:19 +0000

right now the market definitely isn’t efficient.

By: Patrick

Patrick — Tue, 10 Mar 2009 19:52:23 +0000

@FearLES: I don’t buy it. Arbitrage will make the price of the share drop by exactly the dividend amount (on average) on the ex-dividend date, because it’s worth exactly that much less on that day. Dividend capture will work only to the extent that arbitrage doesn’t work, i.e. to the extent of market inefficiencies.

By: FearLES

FearLES — Mon, 09 Mar 2009 21:07:48 +0000

It can actually work not too bad if you have a TFSA and a discount brokerage and you are buying a stock you don’t mind hanging on to if you can’t break even on the stock buying/selling.

By: Dividend Growth Investor

Dividend Growth Investor — Fri, 06 Mar 2009 19:25:34 +0000

I once wrote an article about dividend capture strategy where I said that it is the illusion of getting something (dividend) for nothing..

By: Patrick

Patrick — Thu, 26 Feb 2009 22:22:52 +0000

One word: arbitrage.

I can’t believe anyone would actually take this strategy seriously.