The dividend capturing strategy can be defined as a stock capturing strategy in which the stock is purchased before it goes ex-dividend. This process involves capturing a stock that is going ex dividend then, capturing its dividend and then selling this stock and selecting another ex dividend stock.
Example of Dividend Capture Strategy
For instance, let’s presume you pay for 100 shares of Company XYZ earlier than it declares its next dividend. When Company XYZ lastly announces the dividend, investors congregate to the stock. That forces up the value until the ex-dividend date. The ex-dividend date is typically two business days earlier than the record date, which is the date the company confirms the listing of shareholders who meet the criteria as “holders of record” and will take delivery of the upcoming dividend. Therefore, the ex-dividend date is a cut-off date for acquiring the stock and still being able to receive the upcoming dividend.
On one occasion the stock “goes ex-dividend,” the cost falls to echoes the value of the dividend payment. After the ex-dividend date, buyers of the stock or fund will no longer receive the security’s upcoming dividend payment. There is a chance that a stock may or may not rebound back an only some days after it goes ex-dividend. This is imperative to know since you must embrace the shares for at least 61 days if you want the dividend to be taxed at the lower 15% dividend rate. By applying this strategy the investors can capture 50 percent more dividends as they acquire in a given period of time.
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