|
Dividend Capturing
What is a dividend?
For larger companies, paying their shareholders dividends is a way to moderate growth expectations. Shareholders who receive a steady 3-5% return from their investment don’t cash out as readily when the company falls short of double-digit growth. These quarterly payments also attract people who wish to generate a consistent income from their savings.
| Declaration date |
The date on which the Board of Directors of a company actually sets the amount of the next dividend. As mentioned, dividends are typically paid on a quarterly basis. This declaration occurs weeks in advance of the actual payment date. |
| Record date |
The date that a person actually becomes Shareholder of Record. Because you must own shares of stock in order to receive the dividend, the company actually prepares a list of shareholders who will receive the payment. (Options do not count) |
| EX-Dividend Date |
The day where shares will start trading without the dividend. On this day the price of the stock will be reduced by the amount of the dividend. The reduction comes from the price of the last trade in the previous session. For example, if a stock is selling at $20 on the day before the ex-dividend date, and it pays a .25 quarterly dividend, then it will open the next day at $19.75. This assumes that there are no other factors that may affect the price of the stock at the open on the morning that the stock trades "ex". In addition, all pending orders to buy or sell the stock are lowered to reflect the amount of the dividend payment. |
| Payable date |
The date that the dividend payment actually goes out to the shareholders of record. It will be mailed to those shareholders who hold the stock in physical form, meaning that they actually hold the stock certificate registered in their name. It will be sent to the brokerage firm on this date if the stock is held in a brokerage account, as is very common these days. |
The Dividend Capture
This strategy is executed when a trader buys a stock just before the ex-dividend date, so that he or she will be a shareholder of record on the record date, and will receive the dividend. Because the stock falls by the amount of the dividend on the ex-dividend date, the strategy calls for the trader to then wait for the stock to move back to the price where he or she bought it before the ex-dividend date. At this point, the stock is sold for a break-even trade. The dividend is received, or captured by the trader with no further exposure to the movement in the stock price after it is sold for a break even.
A recent change by the S.E.C. has reduced the holding time for dividend eligibility. A trader may now purchase the stock the day before ex-dividend, and sell the day of ex-dividend, receiving full rights.
Subscription
For subscribers interested in implementing this strategy as a source of income, Optionsource.net provides a monthly calendar of companies paying high yielding dividends. Our analysts carefully select those corporations that exhibit the characteristics necessary to provide consistent income week after week.
Payment is quick and secure.
 |
Learn more about your subscription.
Speculative Opportunities
Covered call Strategies
Dividend capturing
Affiliate Program
Business opportunity and easy residual income. |
|
Events Calendar