Income investors seeking dividend may purchase and hold shares based on dividend yield. There is a strategy our team is curious about, one which involves buying shares just to capture the dividend using the shortest possible holding period.
It turns out, that the strategy is called the Dividend Capture Strategy. In short, this strategy is to purchase a dividend paying stock one day prior to the ex-dividend date and selling it on the ex-dividend date.
Critics of this strategy argue that stock prices often drop in accordance with the dividend amount that is paid. While this makes sense, we haven’t seen enough data to support this claim. That is, our team developed a model that can test this theory at the individual level. Below is an example of the Dividend Capture Strategy applied to AT&T (T).
The assumption is that we would buy AT&T one day prior to the last ex-dividend date, July 9, 2020, to capture the $0.52 in dividend. Continue reading