A subscriber recently wrote and suggested I include some
additional information on dividends, particularly as they may affect
stock price. Before reaching that point, a little review may be
helpful. Generally, there are four relatively important dates that
relate to dividends. They are the announcement date, the ex-dividend
date, the record date, and the payment date.
The announcement date is essentially self-explanatory. It is
the date when a company announces it is going to pay a dividend.
Often, though certainly not always, the announcement may be made
around the time earnings are announced. The ex-dividend date is the
date before which investors need to own the shares in order to be
eligible to receive the dividend the company announces or has
announced it is going to pay. The day the stock goes ex-dividend, the
share price can be expected to drop by the amount of the dividend
since investors who buy the stock then will not be receiving the
dividend. The record date is the date on which the investor must be
the holder of record of the shares in order to receive the dividend.
It is important to realize that settlement on a stock purchase does
not occur until three business days after the order to buy is filled
so if you bought a stock the day before it went ex-dividend, you would
not be the holder of record in time to get that dividend. Finally,
the payment date is obvious in that it is the date that the dividend
is actually paid.
Some investors employ a strategy of capturing dividends. Back
when the Japanese economy was roaring and many Japanese investors were
investing heavily in the U.S. stock and real estate markets, some used
this strategy to great advantage. Essentially the strategy means that
the investor buys the stock after the announcement of a dividend, but
sufficiently before it goes ex-dividend so that he is the owner of
record on the record date. The investor expects the share price to
dip by the amount of the dividend on the ex-date, but, ideally, then
looks for a bounce in share price following that dip to sell the
position so that he winds up with the dividend and is in and out of
the stock in a relatively short time.
Currently dividends are taxed at a very low rate so many
investors prefer to own shares of companies that have a history of
paying dividends. Certain classes of stock may offer very attractive
dividends. Some vehicles even make regular payments that are
federally tax free. I discuss, in detail, the use of many of these in
"Trade Your Way to Wealth," my new book, that is now available on
Amazon.com, at Borders, and Barnes and Noble in the stores and on
their websites. One example of stocks paying high (though taxable)
dividends is the real estate investment trust (REIT). I recently sent
paid subscribers alerts on my trades in and out of such an REIT paying
an annual dividend of over 17%. Preferred stocks also frequently pay
high dividends, sometimes in the 6% and higher range.
Many of these types of investments may be worthy of your study
and investigation to determine whether they fit into your personal
investing plan.
Good Trading!
Bill Kraft
Editor of $10 Trader, Option Trader and Trend Trader
You can comment on this article!
Mr. Kraft's past articles are posted on our website for your review.
$10 TRADER -- by Bill Kraft
We really enjoy trading stocks that are $10 and under. Often they provide the chance to enjoy high percentage gains and, of course, at worst, the risk is limited to what we paid for the stock.
Though I ordinarily mention a stock in the cheaper ranges
in this space each week, at the moment, I believe the best trade in
the $10 and Under category is no trade. Of course, that can change
rapidly and there are now a large number of lower priced stocks on the
radar that may offer significant profit opportunities as the markets
turn back up.
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Our Option Trading Service is for conservative traders that understand leverage principles. We focus on powerful option trading strategies that place volatility and momentum in your favor. And we pride ourselves on minimizing our losses. We always know our downside potential in a trade.
Details Here.
SUCCESS TRADING GROUP -- by Eric Aafedt
52 Wins in 52 Weeks
Our Success Trading service delivers quality trading ideas for the elite investor that has the financial wherewithal and market nimbleness to profit on small moves in a stock's price. Become a member and you will be provided with email and/or pager alerts intended to provide you with the opportunity to make many, many profitable trades.
Our Success Trading Group has closed 52 Wins in 52 Weeks and over 330 winning trades and only 9 losing trades on our Main Trade Table.
Details Here.
TREND TRADER -- by Bill Kraft
Trend trading as we try to practice it is a form of momentum trading. We prefer to try to capture profit out of the middle of the trend rather than try to catch reversal at bottoms and tops.
Details Here.
DIVIDEND INVESTOR -- by Eric Aafedt
Perfect for your IRA! Our Dividend Investor service focuses solely on the "best of the best" dividend paying stocks. Many of the stocks that we will be buying in our Dividend Investor service raise their dividends almost every year. Year after year! This is powerful. We buy these stocks for their powerful dividend producing income; and we will also buy these with a purpose to make capital gains as the stock increases in value.
Feel free to sign-up for a free 30-day trial. During such time you can review our Trade Table and see the type of stocks we are buying. You will also receive all the new investing alerts we send during your trial period. Again, many of the stocks that we will be buying in our Dividend Investor service raise their dividends almost every year. Year after year! This is powerful. Don't miss out on this service!
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COVERED CALL SERVICE -- by Eric Aafedt and the Covered Call Team
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Success Trading Group Trade the same stocks over and over. 330 trades with only 9 losses on our Main Trade Table!
Trend Trader "The Trend Is Your Friend". Utilize trends and momentum in your stock trading!
Option Trader Use the power and leverage inherent in option trading to your advantage!
$10 Trader Focusing on stocks under $10 per share!
Dividend Investor Perfect for your IRA! Quality dividend paying stocks!
Covered Calls Conservative option writing -- Allowed in your IRA!
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