What is Dividend Capture?

Dividend capture

Dividend capture refers to the strategy of buying and selling stocks that are almost ready to declare dividends. Generally speaking, a listed company will declare its dividend on a certain day. And then assume that the dividend will be paid to all shareholders on record on a certain future date. Those who try to buy the stock only for the dividend and then sell it It is said that it is implementing a strategy to obtain dividends or trading dividends.

Observing Trends Helps

Observing trends help to capture the dividends of stocks. Usually, during the board meeting, the company will announce earnings every quarter, and then distribute dividends authorized.

If the company has a profitable quarter. The news will then be announced through a press release or press conference. Larger companies will widely report this news through financial publications and TV stations for business news. 

Companies Usually Announce

Companies usually announce quarterly earnings to the public through press releases or press conferences. For example, Widget Inc. may announce a payment on June 1st. U.S. dollar (USD) dividends, June 30 may be paid to all shareholders with records on June 15.

Ex-Dividend Date

The deadline on June 15 is called the ex-dividend date, that is, the date when shareholders can no longer receive dividends. Therefore, those who wish to participate in the dividend will line up to buy this stock at the close of the market on June 14.

The Dividend Capture Strategy

The key to using the dividend capture strategy to profit is to be able to sell the stock at the price paid by traders, or at a price not lower than the actual price paid. Sell ​​stocks. In order to do this, traders usually want to wait as long as possible before buying to avoid large fluctuations in the market.

The only problem with this is that when the stock goes ex-interest, the amount paid is deducted from the stock value. Therefore, after the ex-dividend date, a stock will trade at $50 and will be valued at $49.

Use The dividend Strategy Bet 

Those who use the dividend strategy bet that the actual value of the stock is closer to the number before the ex-dividend date, and the stock will rebound and increase in a relatively short period of time.

Books Reference

Although in some books, the dividend capture strategy is considered to be a quick get rich in the stock market One way, but many financial advisers strongly advise against this strategy. This requires a lot of research and some luck. In addition, a highly volatile market will make the implementation of dividend capture strategies more difficult.

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