Dividends For Income

[BillP]

Have any of you played dividends on stocks, get in before exdividend date and get from one to whatever days later? Love to hear your thoughts on this.

[tjlocke99]

Bill this doesn't work. The value of the stock price goes down by the value of the dividend on the ex-dividend date.

Richard

[fieldydwb]

I've got a bit in MREITs like NLY, AGNC etc I am offshore so I prefer not to get taxed on my dividends. What I'll do is sell day before Ex-Div and buy again on Ex-div for the dropped price. I love the yields on these guys 11-14%.

I am currently in these ones:

AMTG

AGNC

NLY

CYS

MTGE

HTS

NRF

TWO

[BillP]

sell day before Ex-Div and buy again on Ex-div Help me out here, I dont see how you are getting the dividend? Ok so you are keeping these until the NEXT dividend dates comes around, I think?

Edited September 10, 2012 by BillP

[Thaze]

By selling the day before ex div you can usually get a larger premium from what the stock is actually worth, then buy back on ex div for a cheaper price and then capture the dividend next cycle. The other option is that you can rinse and repeat the original strategy and sell the day before ex div and buy back on ex div day to capture the gain in underlying stock price fluctuation. Please correct me if I am wrong fieldydwb.

Edited September 10, 2012 by Thaze

[fieldydwb]

That's right. I don't want to collect the dividend as it would be taxed at the broker. Since i live in a tax free jurisdiction I'd prefer to capture it as a capital gain.

The drop is equivalent to the dividend.

[BillP]

Ah understand

[BillP]

MO pays a nice dividend you might want to look at that, not for the div but for the move in the stock

Edited September 10, 2012 by BillP

[Thaze]

Just out of curiousity fieldydwb, I understand the strategy (and use it myself occasionally), but how do you decide when to buy the stock to sell before ex-div? This is where I always struggle when using this strategy as it leaves you open to big market swings. Do you have a set time-frame you look to purchase it at? A week in advance, a few days, etc...

[fieldydwb]

Honestly, I look for big dippy days and buy mostly then. For any that I hold up to ex-dividend, I'll usually purchase the same amount on Ex-div day and add it to it throughout.

This is where I put a lot of my passive money. I'd love to know what you guys do with your non-options investment funds. I also do a lot of mechanical investing though I sat out most of the summer re the whole sell in may thing. I found/find mechanical investing to be quite fascinating.

Look at the CAGR of this set of screens for instance:

www.backtest.org/8911SWsp(STtb)(SS(Screamers)(PIH_CSO_safe)3m5l10)16p3c-2

[BillP]

I play options on stocks such as MO, GIS, WMT, WAG, MCD, ect on dippy days. Take small gains, sell, and wait. I buy these things min three months out, and if the stock is say 40.00 I will buy the strike price around 10 percent lower then the stock price itself

[Thaze]

Forward notice: Sorry for the fast response as I am getting ready to head to the gym.

Other than option plays and plays on dividend stocks like these, most of my money goes towards "value stocks" usually. I also like to buy into companies that have exorbitant drops for miniscule reasons, predicting a rebound. Two recent examples of these in my opinion (that I personally hold) are ZAGG and PAY.

Zagg recently dropped 20% due to the misposting of earnings (saying they had missed, when in reality they had hit them dead on) and the strong short interest took advantage of the sell-off. In addition to this the CEO was recently fired because he used his shares of Zagg as "margin" in his personal account, causing the stock to drop another 10%~. These are some huge drops that were not caused by true fundemental issues that I do not forsee causing an issue long term, not to mention the potential benefit they will get from the release of the IP5 this week. In addition to this, you can recieve pretty hefty returns from covered calls on these shares.

PAY dropped 16.5% last Thursday because they had came up short on their wall-street guidance. This was caused because the company had their repair factory burn down, causing revenue to come up shorter than expected. This is a short term loss that will be corrected (in my opinion) after things are reconstructed and go back to normal. I saw this and purchased a long 30/40 Bull call spread on the stock Thursday afternoon. Needless to say, the following morning the stock was upgraded and jumped back over 6% of the loss from the previous day. I feel as if this trend will continue and still has pretty good prospects overall.

Thats a general drist of what the rest of my money goes towards currently. I'm currently looking forward to hearing more back from Chris is his upcoming column on 2SD condor trades and working my way into those in the near future (hopefully)

Edited September 10, 2012 by Thaze

[tjlocke99]

Forward notice: Sorry for the fast response as I am getting ready to head to the gym.

Other than option plays and plays on dividend stocks like these, most of my money goes towards "value stocks" usually. I also like to buy into companies that have exorbitant drops for miniscule reasons, predicting a rebound. Two recent examples of these in my opinion (that I personally hold) are ZAGG and PAY.

Zagg recently dropped 20% due to the misposting of earnings (saying they had missed, when in reality they had hit them dead on) and the strong short interest took advantage of the sell-off. In addition to this the CEO was recently fired because he used his shares of Zagg as "margin" in his personal account, causing the stock to drop another 10%~. These are some huge drops that were not caused by true fundemental issues that I do not forsee causing an issue long term, not to mention the potential benefit they will get from the release of the IP5 this week. In addition to this, you can recieve pretty hefty returns from covered calls on these shares.

PAY dropped 16.5% last Thursday because they had came up short on their wall-street guidance. This was caused because the company had their repair factory burn down, causing revenue to come up shorter than expected. This is a short term loss that will be corrected (in my opinion) after things are reconstructed and go back to normal. I saw this and purchased a long 30/40 Bull call spread on the stock Thursday afternoon. Needless to say, the following morning the stock was upgraded and jumped back over 6% of the loss from the previous day. I feel as if this trend will continue and still has pretty good prospects overall.

Thats a general drist of what the rest of my money goes towards currently. I'm currently looking forward to hearing more back from Chris is his upcoming column on 2SD condor trades and working my way into those in the near future (hopefully)

Interesting points Thaze. Do you just figure out these investments through alot of research or is there a site you use that tips you off?

I am thinking Apple after there 12 Sept event maybe another good candidate. The stock got hammered today. I remember it also dropping alot last Nov after the unimpressive iPhone 4S announcement. It maybe be good to pickup some bull call spreads if the stock takes a big dip after the event.

[Rogers]

These work pretty good as a longer term income strategy using covered calls also. Depending on your market outlook either sell a ITM,ATM or OTM call against stock owned. Nice dividend and nice income from selling the call.. Obviously there are draw backs like upside being capped and downside protection being limited. I use them in my IRA so they are not taxed..

[Thaze]

Interesting points Thaze. Do you just figure out these investments through alot of research or is there a site you use that tips you off?

I am thinking Apple after there 12 Sept event maybe another good candidate. The stock got hammered today. I remember it also dropping alot last Nov after the unimpressive iPhone 4S announcement. It maybe be good to pickup some bull call spreads if the stock takes a big dip after the event.

Usually most of these picks come from just spending a lot of time researching, unfortunately there is no "special website". The one thing I do often do is use the IB most active scanner and look at the biggest drops for the day and then scan through those for potential plays. That was how I found the PAY play for the bull call spread. I'll look at the big drops, look at the reason they dropped, and decide if it was a rational drop or a scared selloff.

I also agree on AAPL, there is definitely a play to be made here, not sure how I want to do it though. I'm thinking about a condor possibly to capture the movement either direction.

[tjlocke99]

Thank you for the update Thaze.