Dividend Rollover Plan

Loading the player...

DEFINITION of 'Dividend Rollover Plan'

An investment strategy in which a dividend-paying stock is purchased right before the ex-dividend date, which gives the purchaser the right to the divided, with the position being sold off shortly after the ex-dividend date. The sole intention of this practice is to reap the value of the dividends while breaking even on the shares. Ideally, this strategy is designed to maximize short-term return on shares while minimizing risk.

Also known as a "dividend capture strategy".

BREAKING DOWN 'Dividend Rollover Plan'

For example, suppose that XYZ Corp. announces that it will distribute a dividend of $2/share and that the ex-dividend date will be on March 16. Joe can attempt a dividend rollover plan by buying the XYZ Corp. stock on March 15 (or any other day before the March 16) and then selling the shares on March 16 to regain most of the purchase value of the shares. Ideally Joe should profit by $2/share (the dividend's value).

Proponents of dividend rollover planning argue that immediate returns on investments are made while reducing risk. However, opponents of the strategy believe that the expected dividend value is already incorporated into the stock before the ex-dividend date because the market anticipates the dividend payout.

RELATED TERMS
  1. Ex-Dividend

    A classification of trading shares when a declared dividend belongs ...
  2. Record Date

    The cut-off date established by a company in order to determine ...
  3. Payment Date

    The date on which a declared stock dividend is scheduled to be ...
  4. Due Bill

    A financial instrument used to document and identify a stock ...
  5. Declaration Date

    1. The date on which the next dividend payment is announced by ...
  6. Dividend

    A distribution of a portion of a company's earnings, decided ...
Related Articles
  1. Investing

    Ex-Dividend Date

    Not too sure what an ex-dividend date is? Find out here and learn how and when you can take advantage of a stock's dividend.
  2. Investing Basics

    Dissecting Declarations, Ex-Dividends and Record Dates

    Understanding the dates of the dividend payout process can be tricky. We clear up the confusion.
  3. Trading Strategies

    Introduction To Dividends: Dividend Dates

    A corporation's Board of Directors must declare all dividends. Four dividend-related dates are important to this process: Declaration DateThe declaration date is the date that the dividend ...
  4. Options & Futures

    Understanding How Dividends Affect Option Prices

    Learn how the distribution of dividends on stocks impacts the price of call and put options, and understand how the ex-dividend date affects options.
  5. Markets

    Due Diligence On Dividends

    Understanding dividends and how they work will help you become a more informed and successful investor.
  6. Investing Basics

    Dividend Facts You May Not Know

    Discover the issues that complicate these payouts for investors.
  7. Mutual Funds & ETFs

    Understanding Taxes on Mutual Funds Dividends

    Learn about the basics of mutual fund dividend taxation, including how and why mutual funds pay dividends and when different tax rates apply to dividend income.
  8. Trading Strategies

    Introduction To Dividends: Doing Your Homework And Taxes

    Similar to any other investments, it is important to perform due diligence prior to making any dividend-related decisions. There are several factors to consider when researching and selecting ...
  9. Term

    The Truth About Dividends

    Dividends may seem like money for nothing, but they have several implications.
  10. Options & Futures

    Conversion Arbitrage: Dividend Risk And Reward

    By John SummaUp to this point we have been concerned with a simplified conversion model, where there are no carrying costs, interest earnings on credit balances, dividend payments or payouts ...
RELATED FAQS
  1. If I sell my shares before the ex-dividend date will I still get the dividend?

    If you sell before the ex-dividend date you will not receive a dividend from the company. The ex-dividend date is the date ... Read Answer >>
  2. How can I find out the ex-dividend date for a stock's dividend?

    Learn about the various information sources from which investors can obtain information about upcoming ex-dividend dates ... Read Answer >>
  3. How can I find out what date(s) I am supposed to be entitled to ex-dividends?

    Understand the various dates associated with payment of stock dividends and specifically how the determining ex-dividend ... Read Answer >>
  4. If a company moves its dividend record date forward, does the ex-dividend date change ...

    When a dividend is declared, there are three important dates for investors: the dividend payable date, the dividend date ... Read Answer >>
  5. Why should I pay attention to a dividend's ex-dividend date?

    Understand the importance of the ex-dividend date as the critical date for determining which stockholders qualify to receive ... Read Answer >>
  6. What is the difference between record date and payable date?

    Learn how to ensure receiving stock dividends by the payment date on record and important dates to keep track of pertaining ... Read Answer >>
Hot Definitions
  1. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  2. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  4. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  5. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  6. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
Trading Center