Dividend mining

R

rozar s'macco

Would it be possible to buy a stock on or day before it's ex-dividend date, capture the dividend and then sell? Also, hedge the position with a bear index or sector etf?

Could I rotate my capital to capture, say, 5 transaction per month. Market exposure could be near zero.

It does not seem to be that difficult to find equities or trusts that are yielding near 10% and sometimes quite higher.

I am a rookie, school me.
 
Quote from rozar s'macco:

Would it be possible to buy a stock on or day before it's ex-dividend date, capture the dividend and then sell? Also, hedge the position with a bear index or sector etf?

Could I rotate my capital to capture, say, 5 transaction per month. Market exposure could be near zero.

It does not seem to be that difficult to find equities or trusts that are yielding near 10% and sometimes quite higher.

I am a rookie, school me.
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You could certainly do that. However, it wouldn't help you if your intent is to capture dividends to benefit from the lower taxation of dividends at the expense of writing off the capital losses at the higher tax rate. The reason is that the lower dividend tax rates are only applied to positions held for 30 days or more (as I recall). So, if you buy a stock, and sell it ex-dividend the next day, you would pay full tax amounts on the dividend and not the lesser dividend taxation rate.
 
I hadn't thought about the tax implications so no, that wasn't my intent off the bat.

Example:
-$20,000 account
-Capture 4 transactions/mo on equities paying 6% yield.

$10,000 into one equity at a time (4x)
$10,000 to hedge the market exposure (4x)
4 dividends captured @ 1.5% ea = $600
16 transactions @ $7= $112
Pre tax profit = $488/mo
Annual pre tax profit = $5856
Pre tax ROI = 29%

Profit could be increased by
a) trading in a tax-exempt account
b) lower transaction fees
c) finding equities yielding on average greater than 6%
d) not hedging market risk

The difficult part may be finding ex-dividend dates that are separated by enough days apart so as to be able to repeat this transaction going "all in" each time.

Tell me I'm an idiot!!
 
Quote from rozar s'macco:

I hadn't thought about the tax implications so no, that wasn't my intent off the bat.

Example:
-$20,000 account
-Capture 4 transactions/mo on equities paying 6% yield.

$10,000 into one equity at a time (4x)
$10,000 to hedge the market exposure (4x)
4 dividends captured @ 1.5% ea = $600
16 transactions @ $7= $112
Pre tax profit = $488/mo
Annual pre tax profit = $5856
Pre tax ROI = 29%

Profit could be increased by
a) trading in a tax-exempt account
b) lower transaction fees
c) finding equities yielding on average greater than 6%
d) not hedging market risk

The difficult part may be finding ex-dividend dates that are separated by enough days apart so as to be able to repeat this transaction going "all in" each time.

Tell me I'm an idiot!!
More...
are you aware that they reduce the price of a stock the same amount as the dividend is on ex dividend day?
 
Quote from vhehn:

are you aware that they reduce the price of a stock the same amount as the dividend is on ex dividend day?
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LOL.

Doh! There goes that plan!
 
Everyone has had that idea at some point. And then they realize that the stock price is reduced by the dividend amount when dividends are paid. And they're like "d'oh!"

Remember the feeling you had when you came up with that idea... that spark of optimism thinking that you just came up with something that will make you a ton of money.

You will experience that feeling many times...

...and the subsequent crash that comes from realizing your idea won't actually work :D

Cheers
 
Quote from total_keops:

Another day another genius.
Way late to the party.
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(yawn) Did you actually read the "plan" that the OP wrote?

I've done dividend capture in a SEP IRA account in certain thinly traded stocks that had ex-dividend patterns that can be exploited.

Didn't see any mention of any such edge in rozar s'macco's plan.
 
Quote from IronFist:

Everyone has had that idea at some point. And then they realize that the stock price is reduced by the dividend amount when dividends are paid. And they're like "d'oh!"

Remember the feeling you had when you came up with that idea... that spark of optimism thinking that you just came up with something that will make you a ton of money.

You will experience that feeling many times...

...and the subsequent crash that comes from realizing your idea won't actually work :D

Cheers
More...

LOL I live for the crash feeling.
 
Write DEEEEP in the money calls 30 day out.

That way you get dividend + some time premium and when you get stocks assigned away you end up with dividend+time premium.

But taxman will be collecting.
 
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