You’ll need to have purchased the shares before the ex-dividend date and “own” them by the time the record date rolls around given the T+3 settlement period requirement. If you sell your shares just one day before the record date, you will not qualify for the dividend. This is the cut-off date after which new buyers investing in a particular company’s stock don’t qualify for the dividend payout. This is known as the T+3 settlement period. Keep in mind that if you sold your shares on the ex-date, the sale would settle after three days. was February 1, and you sold your shares on that same day, you would still be entitled to receive the dividend. On the other hand, if you owned the stock before the ex-date, you could expect to receive payment.įor instance, if the ex-date for ABC Corp. The ex-dividend date, or ex-date for short, is the date when new buyers investing in the stock of a particular company don’t qualify to receive the dividend payout. This is the date when the company’s board of directors announces its approval of the dividend payout, the record date, and the payment date. That being said, there are four important dates you need to be aware of when investing in dividend-paying stocks. You can receive the dividends in your brokerage account as a cash payment, or you can choose to reinvest it to buy even more of the company’s securities to expand your stock portfolio. What you then do with the cash you receive is entirely up to you. Instead, it is simply the money you receive in cash when the company distributes a portion of its profits to its shareholders, quarterly, biannually, or annually. This would essentially be the profit you make over and above what you initially invested, should you decide to sell your shares at any point. Keep in mind that this amount has nothing to do with the appreciating value of the stock in question. That’s a yield of 0.92% on your investment that you would receive in cash. The company pays a dividend of $0.56 per share every quarter, which translates to $2.24 per year. This money forms a portion of the company’s earnings over a specific period, as determined by the board of directors.įor instance, Microsoft stock is currently trading at $243 a share. A dividend refers to money that a company pays out to its shareholders in cash. The Basics of Dividendsīefore getting into the nitty-gritty of what the strategy is about, it’s important to have a firm grasp of how dividends work. How short is “short?” It’s not unusual to buy, hold, and sell stock all in a single day using this method. You identify high-yield stocks, buy them, hold on to them for a short period – long enough to “capture” the dividend they pay – and then sell them. Unlike traditional approaches that revolve around buying stable dividend-paying stock and holding on to them to generate a steady stream of income, dividend capture uses an active trading strategy. What Is Dividend Capture?ĭividend capture puts a new spin on an old investment strategy. What is dividend capture, and how does it work? Here’s everything you need to know. The dividend capture strategy combines the best of both worlds. Some strategies focus on capital appreciation to spur rapid growth while others take on a more laid-back, low-risk approach focused on wealth protection. It is what guides you through the investment process based on your short-term and long-term financial goals, your future capital needs, and your risk appetite.Īs you would expect, the investment strategy advising the decisions of a 27-year-old working professional will be vastly different from that of a 67-year-old retiree. You can think of it as your game plan when building your portfolio. Before you invest in anything, you need to have a solid investment strategy in place to guide your decisions.
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