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Can I buy shares of a company the day before dividend is issued, take the dividend and then sell the next day?
If I see that Microsoft is paying its shareholders dividends on the 20th of September – (example, not sure when they do), can I buy 1000 MS stocks, get paid the dividend on the 20th and then sell on the 21st. Or do I need to hold the stocks for a certain length of time?
Home | Investing | Blog article: Can I buy shares of a company the day before dividend is issued, take the dividend and then sell the next day?
Still reading 5:07 pm on August 29, 2010
There are no rules about how long you need to hold the stock to get the dividend, but you need to be sure you know the date of ownership that will earn the dividend. You also need to know that if you don’t hold the stock for a specific length of time, you will pay taxes on the dividend at ordinary tax rates. Plus, you’re not the only person who wants to do this–so the price of the stock may reflect that buy/sell activity.
telmealing 5:07 pm on August 29, 2010
No
Jo Blo 5:07 pm on August 29, 2010
yes, but
buying the day before won’t work,, but you can sell the day after,, expect they price to fall on the day it pays dividend.
You would have had to own the stock on May 17th to get the next dividend that is paid on June 14th.
shanky 5:07 pm on August 29, 2010
There is no legal need of either pre-holding the stock before dividend or post-holding stock after dividend.
You can sell the stock after receiving the dividend, but investors/ buyers are also smart enough that they would not pay the same price. There will be some discount to the market price due to dividend received.
ecarriganjr@sbcglobal.net 5:07 pm on August 29, 2010
no you have a waiting period
Frank Castle 5:07 pm on August 29, 2010
No.
shortd81 5:07 pm on August 29, 2010
There is no waiting period or a certain amount of time you must hold a stock. But if you get paid dividends you will not make enough to make a profit from just dividends. TRUST ME.
Maybe after holding on to it for a while, but that’s why it’s so hard to actually make money in the stock market. If you made a killing on dividends then everyone would be rich, because they would be doing exactly what you are thinking about trying to do
Oh Boy! 5:07 pm on August 29, 2010
This doesn’t work. First, the day after the stock goes ex-dividend the stock will fall by the amount of the dividend.
Second, you’ll pay tax on the dividend so you’ll actually end up a loser.
For example, stock xyz is at $100 the day before it goes ex-dividend of $1. You buy it on that day, collect the $1, sell the stock for $99 and then pay $0.15 tax on the dividend. You started with $100 and now you have $99.85 and you haven’t even paid commissions on your transactions.
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