One morning, Mrs. Jones asked Johndeo, “how long do you hold a stock to get the dividend”. Well, he paused, and then he answered carefully, because he knew that she is still new in trading.
Traders should hold their stocks only until ex-date to get the dividend, and they need to buy before the ex-date and sell it on or after ex-date. So, only one day is required to get the dividend.
People are taught to subtract two days from the record date to be entitled with dividend, yet they just need to buy the stock one day before the ex-date and sell on or after.
They don’t need to hold the stocks for 60 days. However, if the holding period is short, some countries may impose higher trading taxes.
They should consider the trading costs before taking their trades, for trading costs can reduce theirs profits.
Traders can use a free dividend calendar, and they can find it on the web. Usually, free resources are also available on the stock exchange website.
People should also understand the three most important dates when playing dividends. These are the declaration date, ex-date and payment date. The first two is important in trading because it affects how traders behave.
According to Investopedia, the declaration of dividend encourages investors, and the stock will tend to increase its price up to the ex-date. (source)
People are excited to invest their money, because they know they will receive their dividends, and companies that pay dividends are generally stable.
However, not all companies increase in value because of its dividend declaration.
Traders can lose money, so they should use risk management to protect themselves.
Stocks also increase in value in other countries because of dividend declaration. (source)
So, traders can now create their own trading strategies around dividend declaration.
They can buy at least two weeks before the ex-date, and they can pick support as their entry points.
They can also use technical or fundamental analysis to filter their trades.
Some people can buy stocks one month before its ex-date and sell on or after ex-date.
Well, the longer they hold their stocks the greater their risk, so they need to select stocks carefully.
What if the stock price falls before the ex-date?
Stocks develop their own personality for a long, and often times they become predictable.
Some traders are back testing their stocks, and they want to know the statistics.
Professional traders always study their stocks, before they make trading decisions. They put large money in the stock market, so they need to protect themselves.
Traders should monitor their stocks every single day. They should cut their losses quickly to avoid more losses.
Traders should calculate their risk before taking their trades.
If the risk is greater than the expected price increase and dividend yield, they should avoid trading the stock.
Traders can get their dividends if they buy their stocks before the ex-date and sell also on or after the ex-date.
However, the stock price usually falls at the ex-date, and its recovery may take longer. Generally, the anomalies around stock dividends offers more opportunities to traders. (source)
The price drop is typically lesser than the dividend amount, and traders can make their own profitable strategies around it.
They can conduct their own study, and they can also find their best entries and exits in stock trading.
For improvements, Johndeo found that buying up-trend and liquid stocks at support is recommended.
However, there is no guarantee that people will always make money.
They must apply good money management strategies, if they trade before, on and after the ex-date.
Stocks are also not good for trading, if their trading volume is low. Traders should have.
Some people use fundamental analysis, when they are making their stock selections. For example, they can use price to sales ratio to filter their stocks.
It can be difficult to decide, when many companies declare dividends. People can have their own criteria when selecting the stocks. For more information, the video below shows more details about the ex-date.
Payment date is the day stock holders are paid of their dividends. It does not generally affect the stock price, yet people often neglect it.
Is it necessary to monitor the payment date?
Declaration date and ex-date are the two most important dates when trading dividend stocks, but people should not also forget the significance of payment date.
Brokers usually credit the cash dividends to the account of traders on or after the payment date.
However, there are bad brokers out there, and people may not receive their dividends on time or not at all.
Most traders are often busy, and they might forget their dividend payments. As suggested, they can include the payment dates in their trading journal for their future references.
Johndeo had a bad experience with his previous broker. He did not receive his dividends on time, and he did send several emails to the broker to get it. They parted ways after the incident.
Traders should also choose good and honest brokers, because money not received on time is an opportunity cost.
People can use their cash dividends for their trading, so they need to receive the money as soon as possible.