Buying Dividends: Next Week's Ex-Div Stocks

The stock trading technique called 'Buying Dividends' is becoming more and more popular, especially with the recent increase in the stock market. This is the process of buying stocks before the ex-dividend date and selling the stock shortly after the ex-date at about the same price, yet still being entitled to the dividend. This technique generally works only in bull markets.

When you buy dividends, there are many stocks in many different sectors to choose from. In order to be entitled to the divided, you have to buy the stock before the ex-dividend date and you can't sell the stock until after the ex-date. The actual dividend may not be paid for another few weeks.

WallStreetNewsNetwork has compiled a free downloadable and sortable Excel list of the stocks going ex-dividend during the next week. Here are a couple of examples showing the stock symbol, the ex-dividend date and the yield.

• Abbott Laboratories (ABT), ex-div date: 10/13/09, market cap: $71.3B, yield: 3.4%
• Corus Entertainment Inc. (CJR), ex-div date: 10/13/09,, market cap: $1.3B, yield: 3.5%
• Mid-America Apartment (MAA), ex-div date: 10/13/09 market cap: $1.3B, yield: 5.2%

If you like dividend stocks, you should check out the high yield utility stocks and the Monthly Dividend Stocks at WallStreetNewsNetwork.com or WSNN.com. Don't forget to reconfirm the ex-dividend date with the company before implementing this technique.

Disclosure: Author doesn't own any of the above.

Comments

[THofler:]

The author does have a point about a rising bull market having a positive impact on this technique, but...

Over most of 2007 I had played the monthly dividend payout for Canetic Resources, a high dividend CanRoy trust stock. But, I played it by SELLING ahead of the ex-div, and re-purchasing afterwards and profiting from an oversized drop. I had one miss, but several profitable hits. Why did this work? I don't know except to assume that too many fools were trying to "buy the dividend."

More recently, I notice that one of my high div. MLPs experienced a very large drop after the ex-div. date. I did a 4 year study of this stock looking at the 5 trading days ahead of ex-div. and 10 trading days after ex-div.

One month ago the share price drop was 7.6 times larger than the dividend amount. On a 4 year average, the share price drop was 3.8 times larger than the div. amount. The smallest drop was 1.26X. The three largest drops in the 4 year period were 11.9X, 9.5X, and 8.8X.

So... yes, anything is possible. But I believe dividend exclusion is generally a better bet than dividend capture. Both techniques rely on making two very good trades in a row, which is tough to do repeatably and consistently.

Oct 06 11:29 PM

[alexcampbello:]

do you cover special dividends such as TDG ?
TransDigm OKs special dividend of $7.65 per share
TransDigm group approves one-time dividend of $7.65 per share, completion of debt offering



CLEVELAND (AP) -- TransDigm Group Inc., which makes aircraft components, said Tuesday its board of directors authorized a one-time cash dividend of $7.65 per share of common stock.

Oct 07 10:14 AM

[JOETRADER:]

Would you care to share what stocks you buy/sell for dividend exclusion?


On Oct 06 11:29 PM THofler wrote:

> The author does have a point about a rising bull market having a
> positive impact on this technique, but...
>
> Over most of 2007 I had played the monthly dividend payout for Canetic
> Resources, a high dividend CanRoy trust stock. But, I played it by
> SELLING ahead of the ex-div, and re-purchasing afterwards and profiting
> from an oversized drop. I had one miss, but several profitable hits.
> Why did this work? I don't know except to assume that too many fools
> were trying to "buy the dividend."
>
> More recently, I notice that one of my high div. MLPs experienced
> a very large drop after the ex-div. date. I did a 4 year study of
> this stock looking at the 5 trading days ahead of ex-div. and 10
> trading days after ex-div.
>
> One month ago the share price drop was 7.6 times larger than the
> dividend amount. On a 4 year average, the share price drop was 3.8
> times larger than the div. amount. The smallest drop was 1.26X. The
> three largest drops in the 4 year period were 11.9X, 9.5X, and 8.8X.
>
>
> So... yes, anything is possible. But I believe dividend exclusion
> is generally a better bet than dividend capture. Both techniques
> rely on making two very good trades in a row, which is tough to do
> repeatably and consistently.

Oct 07 10:33 AM

[mbkelly75:]

The ex-div date can work both ways and you can make money selling or buying depending on the stock and it's price pattern. I prefer to buy ahead of the date with stocks that I already own and want more of. If the price drops - it normally does not last long - a few days - so it is not a big deal on a stock that I already have as a long-term hold. If I notice a stock's pattern is a large drop after the date and it only takes a few days to regain it's price - that can be a good play even on stocks that I do not own or want to have long-term for some fast money.

Oct 07 10:40 AM

[Brad Castro:]

I've tried many times to find a dividend capture strategy that works consistently, but I've never been able to. I think you're much better off identifying long term dividend paying investments and acquiring them through put writing.

And after a few years of dividend growth in a high quality portfolio, you'll realize you don't need dividend capture. Be patient - dividend growth trumps dividend capture.

Oct 07 01:33 PM

[MR dUE bILL:]

Buying dividends is nonsense. Fist of all the amount of the dividend is reduced from the opening share price on the the day the stock goes 'ex dividend. If any one believes that they can buy stocks prior to the ex date and sell one day later and make money[less trading fees] please call me as I have some stocks that I would like to sell to you..any profit made the day after the ex date is simply a result of suppy and demand. It is that simple. Read ;work of the dividend dept' Printice hall/ alfano

Oct 07 10:40 PM