How to Do Dividend Capturing

Dividend capture can double the number of dividends earned in a year.

Dividend capture is a stock market investment or trading strategy to earn more than the typical four dividends over the course of a year. The dividend capture trader buys dividend-paying stocks and holds them just long enough to earn a dividend, then sells and finds another dividend-paying stock to buy. Successful dividend capture first requires a significant amount of research, then a plan of when to buy and sell shares.

Instructions

1. Develop a list of high-yield dividend stocks, including the dates for each dividend payment for each stock. Most dividend-paying stocks make distributions quarterly. The important date for a dividend declaration is the record date. An investor must own the shares on the record date to receive the dividend.

2. List your selected stocks in order of upcoming dividend record dates. For the next year, each stock will be listed four times.

3. Monitor the press releases for the nearest dividend payment dates for a dividend announcement confirming the amount of the dividend and the record date. Most companies allow you to sign up for email notification of press releases, including dividend announcements. Many companies include dividend payment information in the quarterly earnings releases.

4. Calculate the ex-dividend date of the next stock on your list to pay a dividend. The ex-dividend date is two business days before the record date. To be an owner of record on the record date you must buy the shares before the ex-dividend date.

5. Purchase shares of the next dividend paying stock a few days before the ex-dividend date.

6. Hold the shares in your brokerage account through the ex-dividend date, and sell the shares when the share price has recovered to your purchase price or higher. The share price will decline by the amount of the dividend payment on the ex-dividend date. To profit from the dividend capture, you must wait for the share price to recover before selling the shares.

7. Repeat the dividend capture buy-and-sell process with the next stock on your list scheduled to pay a dividend.

Tips & Warnings

• A dividend declaration from a company includes the record date and a payment date. The payment date may be several days to a few weeks after the record date. It is not necessary to own shares on the payment date to receive the dividend, only on the record date.

• Study the historic share price movement of your stocks to pick up the best days to buy and sell the shares.

• The pace of buying and selling should allow you to capture 8 to 10 dividend payments per year, spread over several different stocks.

• The danger of dividend capture is buying to collect the dividend and then have the share price decline and stay down. Even with a stock paying a 10 percent dividend yield, each dividend is a 2.5 percent return, and a small stock price decline can reduce or eliminate the gain from the dividend.

References

• Dividend Detective: Dividend Capture Strategies
• Ex-dividend.com: Dividend Capture Explained