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.

Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

References in periodicals archive ?

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).

The Impact of Market Structure on Ex-Dividend Day Stock Price Behavior

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.

Get paid! Mutual funds and ETFs that hold dividend stocks offer cash, tax breaks, and safety in any market

(1984) and find that the high-yield stock ex-day returns were highly influenced by corporate dividend capture.

The ex-dividend day stock price behavior: the case of Portugal

Lummer, 1984, "The Cash Management Implications of a Hedged Dividend Capture Strategy", Financial Management, 13:7-17

12040300 Derivative trading strategies

In a recent letter ruling (LTR 9128050, 4/4/91), the IRS evaluated the efficacy of a dividend capture strategy.

IRS broadens the definition of wash sales: can Cottage Savings carry the day?

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.

Do tax law changes influence ex-dividend stock price behavior? Evidence from 1926 to 2005

Dividend capture by taxable corporations, which face lower taxes on dividend income than on capital gains, represents a special type of short-term trading.

Who trades around the ex-dividend day? Evidence from NYSE audit file data

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.

Delaware Enhanced Global Dividend and Income Fund declares dividend of USD0.0750 per share

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.

Nonstandard-settlement transactions

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.

Delaware Enhanced Global Dividend and Income Fund declares dividends of USD0.0750 per share

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.

A market microstructure explanation of ex-day abnormal returns

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