This ex-dividend trading strategy can make real sense if you are able to move your trading money in and out of these securities within a month.
Timing these securities to obtain the dividends allow you to earn these significant dividends every month rather than once per quarter. This amounts to three times greater earnings.
The Dividend Capture Strategy · The Income Investors
That is a very nice return for a relatively low risk and time-tested strategy like trading ex-dividend date stocks. What is the Ex-Dividend Date?
How the Strategy Works Keeping in mind that the price of the stock will decline on the ex-dividend date, you have to work around this. No Comments.
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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.
Tim Plaehn has been writing financial, investment and trading articles and blogs since His work has appeared online at Seeking Alpha, Marketwatch. Plaehn has a bachelor's degree in mathematics from the U. Air Force Academy.
Share It. Accessed April 9, This is, excess return beyond the normal return that is to be expected based on the stocks previous correlation to the market movements. Hypothesis 1, the dividend inclusive strategy targets the period between the dividend announcement and the ex-dividend date.
Dividend Swing Trade
This follows from the assumption that abnormal stock price movements happen after the announcement of dividend, and that investor preferences might influence the efficiency of the stock price in this period. Hypothesis 2, the ex-dividend strategy targets the period after the ex-dividend date.
The hypothesis is that stocks is inefficient after the ex-dividend date due to investor preferences and that the stock price returns to efficiency after an unknown time period. The ending date for the ex-dividend strategy is calculated using the risk adjusted return of the stocks in the sample.
The optimal ending time is calculated to be nine days after the ex-dividend date as it has the highest cumulative abnormal return.