Then, on June 30, the pay date, you received the dividend of $1.075. The next day, the price dropped and closed at $147.67 - that’s when you sold your stock. Let’s imagine you went ahead and snatched some shares as the trading closed at $148.22 per share. So the last opportunity to buy the stock and still collect the dividend would have been right before market closing on June 2. June 4 was the record date, and so June 3 was the ex-dividend date. ( NASDAQ:PEP) announced a quarterly dividend of $1.075. Let’s take a look at an example to see how dividend capture works in practice. The strategy is the same, but the risks could be lower if the ETF’s share price is less volatile. Instead of buying individual stocks, you could also buy exchange-traded funds that pay dividends. So on an ex-dividend date, there might still be enough demand for the shares to push the price enough to make the strategy profitable. These blue-chip companies have predictable dividend yields and lower price volatility. While this trading strategy can work for any stock, it’s best to use it for high-quality dividend stocks. As long as you held the shares on the record date, you’ll get the payment. It’s not even necessary to hold until the payment date. If that’s the case, it would be profitable to buy the stock right before the ex-dividend day and sell immediately after the record date, collecting the dividend payment on the payment date. Lots of other factors affect the share price every day: the overall stock market trend, macroeconomic news, and of course the demand and support for the stock.Īs a result, the share price might decline by a smaller amount than the dividend, not decline at all, or even rise. In practice, this often doesn’t always happen. The idea is simple: Buyers on that day won’t get the dividend payment so they’ll pay less for the stock than the people who bought the day before and will collect the dividend.

In theory, on the ex-dividend date, the share price should fall by the amount of the dividend.

On the record date, the company takes a snapshot of its shareholders and then sends them the money on the payment date. At any point before the ex-dividend date, investors can buy the stock and get the next dividend. So the order is as follows: The company announces the dividend on the declaration date. This is usually a couple of weeks after the record date. Payment date: This is the day when investors receive the dividend.

If you buy on this day or later, you won’t get the dividend.

Ex-dividend date: This date is set according to stock exchange rules and usually one business day before the record date.

Record date: This is the day the company will check its list of shareholders to determine who gets the dividend.

The announcement also includes the record date. Each company follows their own corporate calendar and usually announces dividends with quarterly or annual earnings reports or through a separate press release.

Declaration date: That’s when the company’s board of directors announces a dividend.

Dividend Terms Every Investor Should Knowīefore we go into the specifics of trading stocks to capture dividends, let’s make sure we’re on the same page about some important terms.įor each dividend, there are several key dates to know: In this post, we’ll explain how this trading strategy works, give a real-world example, and outline advantages and disadvantages as well as some alternatives. This is known as the dividend capture strategy. Unlike regular dividend investing, which is focused on long-term stocks, some traders try to profit from holding stocks for short periods, just enough to pocket the dividend. Wouldn’t it be nice to collect dividends every single day? That’s exactly what some traders aim to do.

Covered call dividend capture strategy