Research : Dividend Capture

As I state in the introduction to this essay:

Dividend Capture is an investment strategy that is based on the idea that market inefficiencies and differential taxation of capital gains and dividends can be exploited to produce excess returns by owning a security for a short period of time that includes the ex-Dividend date. One recommended strategy is to “Buy the stock the day before it goes X, capture the dividend, and sell it the next day. This is the most common Dividend Capture strategy, and the subject of the most academic research (Campbell and Beranck 1955, Durand and May 1960, etc). While the market is rising, this is the simplest, most efficient and least volatile way to capture dividends.”

I discuss various examples of Dividend Capture and examine the usefulness of the concept in the Canadian preferred share market.

This essay also continues the mathematical work embodied in the June 2010 Prefletter essay “Closed Form Yield Calculation”, using the Exponential Approximation as a simplifying tool.

Look for the research link!


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