Dividend Capture

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DEFINITION of 'Dividend Capture'

A timing-oriented investment strategy revolving around the purchase and sale of dividend-paying stocks. Dividend capture is specifically the practice of buying a stock just prior to the ex-dividend date in order to capture the dividend, then selling it after the dividend is paid. The purpose of the two trades is simply to receive the dividend, as opposed to selling at a profit.

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BREAKING DOWN 'Dividend Capture'

Many corporations engage in divided capture trading because of the limited amount of tax that they must pay on the dividend income of other corporations. Dividend capture is synonymous with trading dividends. It should be noted that many financial planners frown on this strategy for individual clients; the amount of time, research and trading commissions necessary to do it successfully often offsets any profits received.

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RELATED FAQS
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    Preferred and common stocks are different in two key aspects. First, preferred stockholders have a greater claim to a company's ... Read Full Answer >>
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    Despite the fact that earning dividends requires no active participation on the part of the shareholder, they do not meet ... Read Full Answer >>
  3. Is dividend income taxable?

    Dividend income is taxable but it is taxed in different ways depending on whether the dividends are qualified or nonqualified. ... Read Full Answer >>
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    Distribution of dividends reduces the net asset value (NAV) of mutual fund shares. However, this doesn't mean that fund investors ... Read Full Answer >>
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