These days, everyone is looking for safety—and that’s got some folks pondering some pretty, er, unusual strategies that seem secure but are in fact anything but.
One such strategy is known as dividend capture, which sounds like a way to bag a company’s quarterly cash dividend without taking the risk of owning the shares. I don’t like the name because it sounds like something we dividend investors should be interested in. I don’t like the approach itself because it doesn’t really work.
The theory seems innocent enough:
- Find a stock that is about to pay a dividend,
- Buy it before it’s “ex-dividend date,”
- Pocket the payout, and
- Sell the shares after.