lilredrooster
lilredrooster
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November 16th, 2016 at 5:03:43 AM permalink
I don't trade stocks but I have to admit this strategy is interesting. The idea is to buy a stock shortly before it pays a dividend and then you are entitled to the full dividend. High dividend paying stocks will pay as much as 5% or more. Of course, after paying the dividend the stock price will automatically shrink by the amount of the dividend. But the claim of people who do this is that in many cases the stock will shortly rise to or above its pre-dividend levels for various reasons. There are tax consequences but they can be successfully avoided by trading in an IRA account instead of a regular account. As Maxwell Smart used to say, "very interesting." I'm curious as to whether or not anyone has done this or considered this. This link is to a proponent of this strategy and it may be overly optimistic. But it's from thestreet.com which is pretty well respected at least by those who advocate actively trading stocks. I'm surprised that this site doesn't have a stock trading forum unless I missed it somehow.


http://realmoney.thestreet.com/articles/02/01/2014/diary-dividend-diva-overview-div-capture-strategy
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billryan
billryan
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November 16th, 2016 at 6:27:33 AM permalink
I've looked into it, but there are a number of issues. A stock that pays 5% will only pay 1 1/4% per quarter, so the amount "invested" must be pretty high to overcome fees and taxes if not in an IRA.
I prefer to simply invest in these stocks.
Another option I disagree with is investing in thirteen dividend stocks so you get a check every week. Superior quarterly checks trump inferior weekly checks.
The difference between fiction and reality is that fiction is supposed to make sense.
ThatDonGuy
ThatDonGuy
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November 16th, 2016 at 6:31:47 AM permalink
Quote: lilredrooster

As Maxwell Smart used to say, "very interesting."


"Would you believe..." that it wasn't wasn't Maxwell Smart, or any other Get Smart! character for that matter, who had that as a catchphrase? "Very interesting, but..." is what Arte Johnson's "German" character on Rowan & Martin's Laugh-In usually said. (I think the most famous version is, "Very interesting...but stupid.")
lilredrooster
lilredrooster
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November 16th, 2016 at 9:25:03 AM permalink
Quote: billryan

I've looked into it, but there are a number of issues. A stock that pays 5% will only pay 1 1/4% per quarter, so the amount "invested" must be pretty high to overcome fees and taxes if not in an IRA.
I prefer to simply invest in these stocks.
Another option I disagree with is investing in thirteen dividend stocks so you get a check every week. Superior quarterly checks trump inferior weekly checks.




A related strategy that I've read about is to buy the dividend paying stock about one week before the ex dividend date hoping that the stock will bump up because people are buying in anticipation of the dividend. And then selling right away if you do get that bump up even before receiving the dividend. Since you own dividend paying stocks you probably know if they tend to bump up immediately before the ex dividend date. For people who would rather trade than be long term. I'm not claiming to be any kind of expert on this. Just some interesting stuff I read.
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billryan
billryan
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November 16th, 2016 at 11:52:54 AM permalink
Unless you are talking hundreds of thousands or dollars per trade, I believe the results long term are negligible. I check my stocks on an occasional basis. I follow the Ronco school of investing. I set it, and forget it. Day trading is risky, most who do it fail.To do it right, you need the right equipment, and a Bloomberg subscription. Otherwise you are making decisions that the big boys made ten minutes before.
Last edited by: billryan on Nov 16, 2016
The difference between fiction and reality is that fiction is supposed to make sense.
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