there is a way to capture dividends. a whole bunch of guys down here in Australia do it every day. i have a fair idea of hows its done, and over a small sample size (30) from using yahoo data and streetevents.com my model has made money. i have no backtesting program that can test this idea in a rock solid format. i am thinking about starting a journal so we can all work on this, but the only thing that is detering me is the bashers, they really do curb learning.
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n00b question: Can I buy a stock a day before dividends issue and get my dividend?
- Thread starter jay42
- Start date
Maybe I'm taking this too literally but I don't think GUARANTEED is the appropriate term here.Quote from zippie26:
So if a company "announces" a dividend, that doesn't mean you get the dividend and then sell the stock at the same price you bought it. It means you HAVE to own it on a certain day, and the following day the stock is GUARANTEED to drop by the amount of the dividend (+ or - market fluctuation) the next day.
Stock prices are set by supply and demand, not mathematical formulas. The stock price is no more guaranteed to be reduced by the dividend amount ex-divdend than a 2-1 stock split is guaranteed to trade at exactly half the price it was before the split.
Psychology plays a big role in stock prices. Saying that any deviations from these golden rules is just market fluctuation doesn't wash for me. I'm not saying that there is easy money to be made with dividend plays just that I don't think its as cut and dry and some people are making it out to be.
Also consider the tax implications of dividends, if a stock is close to paying a dividend some buyers may wait until it goes ex-dividend before buying because they dont want the tax liability of recieving the dividend - that would be one reason why there would be unusual upward pressure on the price on the ex-dividend date.
Quote from winter:
Maybe I'm taking this too literally but I don't think GUARANTEED is the appropriate term here.
Stock prices are set by supply and demand, not mathematical formulas. The stock price is no more guaranteed to be reduced by the dividend amount ex-divdend than a 2-1 stock split is guaranteed to trade at exactly half the price it was before the split.
Psychology plays a big role in stock prices. Saying that any deviations from these golden rules is just market fluctuation doesn't wash for me. I'm not saying that there is easy money to be made with dividend plays just that I don't think its as cut and dry and some people are making it out to be.
Also consider the tax implications of dividends, if a stock is close to paying a dividend some buyers may wait until it goes ex-dividend before buying because they dont want the tax liability of recieving the dividend - that would be one reason why there would be unusual upward pressure on the price on the ex-dividend date.
Good point. I was trying to keep it simple for a newbie.
Quote from zippie26:
Off the top of my head, these are the points you need to consider.
You need to hold the stock by the "record date" to get the dividend. This day is usually 1 day BEFORE "ex-dividend" date.
So if a company "announces" a dividend, that doesn't mean you get the dividend and then sell the stock at the same price you bought it. It means you HAVE to own it on a certain day, and the following day the stock is GUARANTEED to drop by the amount of the dividend (+ or - market fluctuation) the next day.
Some people like to buy into the dividend, but a quick and easy profit is not the reason. The opportunity doesn't exist in this example.
Just to get the time line right, the "record date" is NOT 1 day before the ex-dividend date, it is 2 days AFTER it.
The dividend is always paid to the holder of record on a set day, that's why it is called the "record date" (aka "Holder of Record Date"). Since stocks settle on T+3 basis, the latest you have to buy the stock to be the holder of record on "record date" is 3 days before it or the day before the ex-dividend date. That's why it is called the ex-dividend date - if you buy the stock on the ex-dividend date then the transaction will settle 3 days later, which will be the day after the "record date", hence you will not be entitled to receive the dividend.