Understanding the Dividend Strategy

The simplest way to play the dividend strategy is to buy a stock a few days before the ex-dividend date, then sell it a few days after at about the same price. If no other news, the stock fluctuates around its long-term trend. You keep the dividend as net profit.

This works better with bigger dividends. Ideally, the dividend should represent 2% or more of the share value. Use the SmartDividend.com web site to get alerts for all big dividends on Wall Street.

For more information about the Dividend Strategy, read "Wall Street Money Machine" by Wade Cook.

See Also : FAQ, Glossary, Dividend ETFs, Taxation, Advanced.

Exemple

On the smartdividend.com web site, you read the following entry:

DSX ex-dividend on 2/24 (2%)

Diana Shipping (DSX), a dry bulk transporter, will pay a dividend of $0.40 on March 9 to holders as of Wednesday, February 24. This represents about 2% of the share price, or an 8% annual yield.

This means you must hold shares of Diana Shipping Inc. (symbol: DSX) at stock market opening on February 24. If you do, you will receive $0.40 cash per share, and that amount will be paid to you on March 9.

If you play the dividend capture strategy well, you should be able to buy Diana Shipping a few days before the 2/24, and then sell it a few days after 2/24 for about the same price.

Make sure you monitor the stock while you hold it for any important news. News can affect the long-term value of the stock, and you may need to adjust your selling price up or down to reflect the news.

Shorting, Put and Call options

There is more to Dividend Investing of course. The most active dividend investors tend to be short-term traders. The idea here is to take advantage of the natural price fluctuations created right before and after ex-dividend.

If you feel comfortable with short-term trading, and you've read the disclamer, you may proceed to "Dividend Strategy for Advanced Investors."