I think by most peoples' definition, dividend capture means buying the stock prior to the ex-div date, and then selling the stock after it recovers from the ex-div drop, thus "capturing" the dividend. As the Motley Fool suggests, this is not a very productive strategy.
I look at it another way. I see a large dividend (I define large as over 30 cents) as a "news" event that draws people to want to buy this stock - especially if this divdend has been increased (which has been quite often this spring).
so therefore, as I said, I scan for such news events, and buy in, and then hold until the dividend has been "reached". [Ie, the price has appreciated by the amount of the dividend plus 5 cents for roundtrip expenses.]
I have only been doing this for a short while, and beginners luck, special market conditions, or whatever, it has been successful, and believe me, I am no great trader. Frequently I miss a move altogether because I think a stock has "gone up" too much before I see the announcement, or because some small move down scares me out early (ie, I am afraid to "loose" my profits). Nonetheless, I am making maybe 4% a month on my total invested capital. (See me in a year to see if I can keep this up!)
As an added bonus, you don't have to change your current (or basic) investing strategy at all. How so? Well, just use the dividend stocks you would keep anyway as your "base" investment. Then use the margin generated by these more or less permanent positions for the usually short trades necesary to "capture" the dividend as mentioned above.
as my base investment, a couple of months ago I loaded up on a few junk bond closed-end funds.I sort of fell into this, and as long as the economy continues to grow at all, I will keep them. So they provide a hefty dividend as it is, plus what I get on the dividend capture trades.
To give you an example, yesterday I bought BDN at $21.79 about an hour after it announced its 44 cent dividend, with a nearby ex-div date of 4/2. I immediately put in an order to sell at $22.28. As usual, the weak market today, and BDN's difficulty breaking through $22, is making me nervous, but it should make it...
Even if yo hate this idea, I suggest you take a look at this url: marketguide.com . For dividend investing it can't be beat. Not only can you screen for dividend yield (which I actually find rather useless), but you can also scan for indicated annual dividend and payout ratio. You can set price and volume brackets and screen many many more variables. best screening site I have ever seen.
well that's it I'll leave you in peace now!
Bob |
