Dividend Buys: 3 Stocks to Watch

Now that the market has had a selloff, now might be the time to start looking for dividend buys. The stock trading technique called 'Buying Dividends' is becoming more and more popular. 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 dividend, 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. WSNN.com came up with many companies all with market caps over $500 million. Here are a couple examples showing the stock symbol, the ex-dividend date and the yield.

E.I. du Pont de Nemours & Company (DD) ex div date: 11/10/09 market cap: $29.3B yield: 4.9%

Duke Energy Corporation (DUK) ex div date: 11/10/09 market cap: $20.7B yield: 6.0%

Linear Technology Corporation (LLTC) ex div date: 11/10/09 market cap: $6.1B yield: 3.3%

The rest of the ex-dividend stocks can be found at wsnn.com. (If you have been to the website before, and the latest link doesn't show up, you may have to empty your cache.) For more details on dividend definitions, check out definitions of dividend dates. 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

[mbkelly75:]

The technique works well when the stock is trending up, not so good when it is trending down. It is a useful way to either your cash holdings or to stocks you already own and wish to increase your holdings while cutting down your cost-basis. LINE is a good example of what to look for coming up soon. It goes X-Div on 4 Nov, records on 7 Nov, and pays on 13 Nov. Not only does it's fundamentals say that it is undervalued right now, but it is trending up and has a really nice dividend. It is an MLP and pays quarterly.

Oct 31 12:23 AM

[YoYoMama:]

Yep, lots of great dividend buys right at support now. I believe we will see another trend up, the volume was pathetically low Friday. Good buying opportunities abound.

Oct 31 09:34 AM

[TCK:]

Sounds good, perhaps slightly more difficult in practice. Considering that the price of the stock is adjusted down the amount of dividend after the ex date, commissions in and out, and tax considerations .

Nov 02 07:24 AM

[mbkelly75:]

The price of the stock usually drops by roughly the amount of the dividend payment - that is true. However, it usually only takes a few days to catch back up to where it was. Commissions in and out are an expense, but you ARE getting paid the dividend. In my case, $4 each way is the commission ($8.00 Total). If I get more than $8 in dividends and/or the stock moves up enough to cover the $8.00, I am at least even and usually I make money from the transaction. Tax considerations - you pay taxes not matter what you do - they are a cost of doing business. I have my account set to "First In, First Out" so if I have taken a tax loss on my previous purchase of the stock - buying it for a dividend capture and reselling afterwards - reduces my taxes instead of increasing them. On top of that, my broker re-invests the dividends for me automatically with NO commission so I reduce my cost-basis of the stock AND increase dividend income in the future with what is effectively free stock. It does not work all the time - few things do - but done with the right stock at the right time - it makes you money every time. Even if the stock falls in price a bit instead of going back up - the added dividends from the re-investment will eventually make the loss up. I am a long-term investor and do this with stocks in my Core Portfolio so time is not a problem for me. Over a decade or more - the additional dividends from effectively free stock can only help.


On Nov 02 07:24 AM TCK wrote:

> Sounds good, perhaps slightly more difficult in practice. Considering
> that the price of the stock is adjusted down the amount of dividend
> after the ex date, commissions in and out, and tax considerations
> .

Nov 04 11:26 AM