I read the wiki on how dividends work, but I would like to confirm my understanding.

so using BAC for example:

The dividend is payable on September 28, 2007 to shareholders of record on September 7, 2007.

This means all I have to do is hold shares on Sept 7? so, if I wake up sept 7 morning and buy shares and then sell them of sept 8, i will still receive the dividends on the 28th? is my understanding correct?

i ask because i made this little spreadsheet model that calculates return rates based on the dividend and share price. I am thinking that I could collected the dividend and sell off the stock and buy into another banking offering dividends a little later in the month. Basically make 2%+ in a span of 1 month assuming I can sell the stock for the same as which i bought it for. Looking back at the historicals, the prices have, in some cases, gone up after dividends were distributed.

so the strat is buy right before dividends are distributed, then sell (same price or higher), then buy into another stock where dividends are distributed basically getting 1% everytime. please let me know if this idea will work out.

i am looking to buy into BAC a little before sept 7, selling promptly, then buying some CMA (comerica bank) before sept 15, then selling again.

 

[QUOTE=trainwreck,Jul 30 2007, 10:38 AM]This means all I have to do is hold shares on Sept 7? so, if I wake up sept 7 morning and buy shares and then sell them of sept 8, i will still receive the dividends on the 28th?

 

[QUOTE=magician,Jul 30 2007, 11:53 AM] Yes.


That's, to put it mildly, a na

 

Dividend payouts come straight off the share price. If BAC's stock is $50 before the dividend and they pay a $1 dividend/share then the stock will be $49 on Sept 8th. What you are suggesting is a zero sum game.

 

what do you mean dividend payouts come straight off the share price?
are you saying it is the norm to have the price drop roughly the same amount as the dividend payout? if so, couldnt you just short the stock if you know the drop is coming?

so bac is currenly at 48. they announced a 0.64 dividend for those on record as of sept 7. thats a return of 1.333% or 5.33% if they continue the same dividend payout for the rest of the year.

CMA is at 54. they are paying out .64 (1.118% or 4.74% on the year) also for those on record as of sept 15. so, if BAC drops less than .64 after the record date, i could cash out and put it in CMA and collect the difference...

thanks for your input everyone. Just trying to see if i can make a quick 2.4% in a month.

 

Sure you could. However, you have to pay the dividend to the owner of the stock you borrowed to sell short.

Every way you look at it you lose.
Simon & Garfunkle - "Mrs. Robinson"

 

In essence this is no different than trying to buy a bond just before the coupon date and selling it just after the coupon date, expecting to get to keep the entire coupon payment for yourself. Alas, you have to pay the accrued interest when you buy it.

At least with bonds there's a clear distinction made between the clean price and the dirty price, so that you know how much accrued interest you're paying. With dividend-paying stocks there is no explicit accrued dividend.

 

BAC becomes instantly worth 0.64 less the second they take that 0.64 per share off their balance sheet. The money doesn't come from thin air and a dividend is the disposition of an asset (cash). In the event there is a tiny imbalance in the price ex-dividend, gnomes knows as arbitrageurs run around and scoop up the overhang.

What you propose is akin to real estate investing according to the rules of monopoly. It doesn't work that way. Even if it did, large institutional banks and investors with the brightest of the brightest minds in finance and decades of institutional experience and knowledge and more money and market access than most countries would be there long before you my friend.

You can make a quick 2.4% in a month, you can do it in a day, the old fashioned way of putting capital at risk in the markets, not through some trick or loophole in the market system. Not to offend but you and I are but tadpoles swimming in a sea of sharks.

You know what they say to gamblers with a system in Vegas? Welcome.

 

i take no offense. I apreciate the feedback. being new, i expect to get burned and learn from my mistakes (seems like its the only way i learn).

 

Asking a "stupid" question is not a mistake. Not asking a "stupid" question might be the start of one. As they say, if it seems too good to be true it probably isn't.