The JSE and finance forum for South Africa
General Category => Shares => Topic started by: Nios on August 04, 2014, 06:38:21 pm
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Read a book from the UK once upon a time about this but can't for the life of me remember the title.
Idea is to grow your portfolio from dividend payouts by buying high quality high yielding dividend stocks and then selling the shares after the dividend payout. Obviously volumes need to be large enough to cover buy and sell transactions fee's.
The assumption is that the high quality stocks are not very volatile to safe guard against massive price fluctuation upon entry and exit.
1. When is the latest you can purchase a stock as close to the dividend payout date?
2. Is there a rule as to how long you need to own the stock for after the dividend payout?
3. Anything else one should take note of with a strategy like this?
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1. LDT, seconds before auction is fine. (usually 16:50)
2. No, you may sell ex div next day (usually Monday) but remember point 3:
3. When share trade ex div the following day (usually Monday but not always), the price will fall accordingly (because of opening auction 8:50), and also watch out for tax (3yr tipping point)
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Thanks Moneypenny.
Is there a tried and tested way to do this profitably?
The fact that the share price drops by the same value as the dividend the next day or Monday will make the trade a loss after deducting transaction costs, negating the strategy.
I may remember reading something about writing a covered call or put option when purchasing the stock to get you into profit after the dividend had been paid and stocks sold off. This sounds very technical and would love to learn more about it.
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Anyone?
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Hmmmm interesting comment you made there. I wonder if I can buy a CFD to go lower, because as you mentioned, the price tends to fall by the value of the divvy.
I have investigated the whole divvy thing. You need so many shares to make it worth your wile. The alternative would be to buy a derivative that does get a divvie payout like share installments on the share. But that opens another can of worms.
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Well let's say you have the means to purchase that kind of volume...how would it work?
I know nothing of derivatives
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I guess it can work if a person has good knowledge about stock market. It is necessary to know that which stock is good for buy and which one is worse. To earn higher dividend, it is necessary to have good stocks in your portfolio.
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Well, I guess the idea is to buy the stocks with a high probability of still going up after the dividend payment.