T D asked in Business & FinanceInvesting · 7 years ago

Can you buy a stock on the day a dividend is given and sell right after?

I was just wondering, can you buy a stock on the day a dividend is given, take the dividend, and then sell the stock straight away?

Is the legal? Do people do it? What is the effect of this in large quantities if it happens

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  • 7 years ago
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    In North America, NO - the date a dividend is given is the payable date, in order to receive the dividend you must be holder of record as of the record date. However in order to receive the dividend and be a holder of as of the record date you must purchase the stock before the X-date which is two days before the record date.

    In the North America, it would not work since you must own the stock before the X-date which is before the Record date which is before the Payable date.

    Source(s): from the street
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  • 7 years ago

    <<<I was just wondering, can you buy a stock on the day a dividend is given, take the dividend, and then sell the stock straight away?>>>

    The answer is "yes" if you define "the day a dividend is given" as the day before the ex-dividend date. You can buy a stock the day before the ex-dividend date then sell it on the ex-dividend date and get the dividend.

    There are always at least a few days between the ex-dividend date and the date when the dividend payment is made, so if you wait until the payment date to buy the stock you will not get the dividend

    <<<Is the legal?>>>

    Yes.

    <<<Do people do it?>>>

    I am sure there are, but I don't know of anyone who does it. It is not an effective way of making any money. The market is efficient enough to adjust the stock price by the amount of the dividend when the stock goes ex-dividend

    For example, assume XYZ announces they will pay a dividend of $1.00 on the common stock on March 1, 2013 and that the ex-dividend date will be February 21, 2013. If the stock closed at $20.00 per share on February 20, 2013 it will open on February 21, 2013 within a couple of pennies of $19.00 a share unless there is news overnight (between the time the market closes on the 20th and the time the market opens on the 21st) which has an impact on the stock price. The investor who tried to make money by owning the shares just long enough to get the dividend will make $1.00 per share from the dividend and lose $1.00 on the stock because he will sell it for $1.00 less than he paid for it. If you include the trading costs (commissions) to buy and sell he will have a loss.

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  • Anonymous
    7 years ago

    You must be very naive if you believe the market has long been unaware of such a tactic and failed to have any counter measure. It`s why share prices often fall when results and dividends are announced by creating an unofficial ex=dividend date. The inference being take the price but leave the dividend.

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  • 7 years ago

    A few years ago, a fund ADVDX from Alpine was introduced with much fanfare. It's claim to fame was a way to execute a "dividend capture " algorithm.

    Since its inception, it has suffered a loss each year. Assets have shrunk each year, and it is now a shadow of it's former self. The only consistent parameter is that it loses money ( about a -5% return ) over time.

    Goes to show that the market is efficient, and even the pros cannot take advantage of it.

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  • John
    Lv 6
    7 years ago

    The little fact that you and everyone else who brings this question to Yahoo are overlooking is that on the ex-dividend date the stock is expected to drop by the amount of the dividend.

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  • 7 years ago

    You need to buy a stock before the ex-dividend date to get paid the dividend. If you buy the stock on the day a dividend is given, you will not be paid the dividend.

    Intentionally buying a stock before an ex-dividend date and selling right after is completely legal. Indeed, this profit seeking activity is what makes the stock market so efficient.

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  • 3 years ago

    1

    Source(s): Secrets of Great Investments http://teres.info/TheTradingCode/?b3pa
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  • 7 years ago

    Stocks are sold in blocks.

    If you own the stocks,you can do whatever you want.

    Source(s): Knowledge.
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