dividend capture

Dividend capture

Dividend Capture

The practice of buying a stock before the ex-dividend date and selling immediately thereafter. The ex-dividend date is the date after which a dividend belongs by right to the seller, rather than the buyer, of a stock. Thus, dividend capture allows the investor to keep the dividend after selling the stock. An investor practicing dividend capture is only interested in a stock for the dividend it produces and therefore sells the stock as soon as he/she can retain the dividend.

dividend capture

The trading of a stock in order to be the holder of record for dividend payment purposes. Once the right to receive the dividend payment has been earned, the stock is sold. Dividend capture is practiced chiefly by corporations; they are permitted to exclude from their taxable income 80% of dividends received. Certain specific tax rules apply to dividend capture.
References in periodicals archive ?
The Fund also uses enhanced income strategies by engaging in dividend capture trading; option overwriting; and realization of gains on the sale of securities, dividend growth, and currency forwards.
Consequently, another major strand of the literature argues that PDRs less than one reflect the execution costs faced by tax-neutral or tax-advantaged entities employing "dividend capture" strategies (see, e.g., Kalay, 1982; Boyd and Jagannathan, 1994).
Its top holdings include familiar names such as McDonald's and ExxonMobil, This mutual fund also holds some high-yielding preferred stocks and may use "dividend capture" strategies, acquiring stocks just before they make their dividend payouts.
(1984) and find that the high-yield stock ex-day returns were highly influenced by corporate dividend capture.
Lummer, 1984, "The Cash Management Implications of a Hedged Dividend Capture Strategy", Financial Management, 13:7-17
In a recent letter ruling (LTR 9128050, 4/4/91), the IRS evaluated the efficacy of a dividend capture strategy.
However, this conclusion applies only to a carefully filtered sample of high-yield securities that are likely targets of corporate dividend capture after the introduction of negotiable commissions in May 1975.
Dividend capture by taxable corporations, which face lower taxes on dividend income than on capital gains, represents a special type of short-term trading.
It invests globally in dividend-paying or income-generating securities across multiple asset classes and also uses enhanced income strategies by engaging in dividend capture trading; option overwriting; and realisation of gains on the sale of securities, dividend growth and currency forwards.
A major use for nonstandard-settlement trades is dividend capture. By purchasing a dividend-paying stock and simultaneously selling that same stock with a different settlement date, a trader can lock in a dividend without risking a fall in the stock price.
It invests globally in dividend-paying or income-generating securities across multiple asset classes and also uses improved income strategies by engaging in dividend capture trading; option overwriting; and realisation of gains on the sale of securities, dividend growth and currency forwards.
The marginal investors are short-term traders who generally practice dividend capture by buying high-dividend-yielding stocks cum-dividend and selling them ex-dividend.(3) The size of any ex-day abnormal returns created by dividend clienteles will be arbitraged away by short-term traders up to (or down to) these traders' marginal transactions costs.