How to Sell After the Ex Dividend Date

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The dividend capture strategy includes selling stock soon after the ex-dividend date.
The dividend capture strategy includes selling stock soon after the ex-dividend date. (Image: Jupiterimages/Photos.com/Getty Images)

Selling stock after the ex-dividend date is part of a stock trading strategy referred to as dividend capture. Most dividend-paying stocks make distributions four times a year. Dividend capture attempts to buy stocks and hold them for a few days to earn the dividend. Instead of earning four dividends a year, dividend capture allows a trader to earn eight to 12 dividend payments per year from different stocks.

Research and develop a list of high-yield, dividend-paying stocks with staggered dividend payment dates. An optimum list will have stocks paying on a January, April, July, October cycle. Other stocks will pay on a February, May, August, November cycle. A third set of stocks will pay dividends in March, June, September and December. Only a couple of stocks on each cycle is necessary.

Look up the historic payment dates for each stock on your list. Each time a company pays a dividend, a few weeks before the dividend payment the company will announce the record and payment date of the next dividend. These payments occur at approximately the same time each year. Using a grid or spreadsheet to list the stocks, dividend months and payment dates will be useful.

Sign up for email notification of press releases on the investor relations page of each stock on the dividend list. A company will announce dividend payments through press releases on the investor pages of its website. The email notification is the best way to make sure you receive the dividend notifications on a timely basis.

Note the record date of the dividend payment when a company announces the next dividend payment. Shares must be owned on the record date to receive the dividend. Count three business days before the record date to determine the ex-dividend date. To be the official owner of shares on the record date, the shares must be purchased before the ex-dividend date.

Buy shares of the selected dividend capture stocks a few days before the ex-dividend date. Hold the shares through the ex-dividend date and sell when the share price is equal to or higher than the purchase price. The dividend from the shares will be paid into your brokerage account on the dividend payment date.

Tips & Warnings

  • The share price of a stock drops by the amount of the dividend at the open of the ex-dividend date. Selling right on the ex-dividend date will result in a stock loss equal to the dividend earned. Shares must be held until the share price recovers.
  • Study the historic share price movement during the few weeks before and after the ex-dividend dates to pick the best days to buy and sell shares around the ex-dividend date.
  • Any stock can drop in value, wiping out any profit made from the dividend capture. Do your own research and understand the risks before attempting a stock trading strategy like dividend capture.

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