In a world where markets operate with perfect efficiency, the dividend amount would be exactly reflected in a company’s share price until the ex-dividend date, when the stock price would fall by exactly the dividend amount - negating the dividend harvesting strategy. You will need to sell on the ex-dividend day or after. The reverse is true if you want to sell a stock and still receive a dividend that has been declared. To summarise: If you buy a dividend-paying stock one day before the ex-dividend you will still get the dividend if you buy on the ex-dividend date or after, you won’t get the dividend. ![]() The security generally trades without its dividend after the ex-dividend date. The ex-dividend date is typically the last business day before the record date and the final chance for pending stock trades to settle. The record date is the date on which an investor has to own shares in a company in order to receive the declared dividend. The dividend harvesting strategy is widely accepted as working best with larger, less frequent dividend payouts. Dividends are usually paid out annually or quarterly, but some are paid monthly. Other rules such as having to hold the shares for 45 days or more in order to be eligible for the franking credits may apply, depending on the country, market or exchange. This allows the investor to receive the dividend and any associated franking credits, while hoping the likely share price fall in the aftermath and admin fees are less than the dividend and tax credit received. The theory behind dividend harvesting strategies is to buy shares in companies just before they pay their dividends and sell them soon after. While this article will explain this concept in more detail, it should be noted that actively trading in and out of positions to collect dividends is a risky undertaking and should be discussed with a financial adviser or similar expert before being attempted. ![]() ![]() These dividend investors looking to live off the dividend income from their investment portfolio - either now or in the future - are often attracted to a strategy known as ‘dividend harvesting’ or ‘dividend capture’. This is especially true in countries like Australia, which boast a generous dividend imputation system that provides tax advantages to all investors and especially those approaching or in retirement. Globally, investors seeking ongoing income love companies that pay out a regular dividend.
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