Shareholders as of June 17th will be paid on July 28th. Is it necessary to hold the stock through July 28th to receive the dividend or can you sell the shares prior to July 28th and still get the dividend? Thanks in advance.
"You only need to own the stock for one day (the record date) to be entitled to receive the dividend payment. If you buy before the ex-dividend date, and sell on the ex-dividend date or after, you will receive the dividend payment." In other words, if you bought IVR on the 10th-Friday, you can sell on the ex-div date of 6/15 and still get your dividend.
To take that a step further: "BETHESDA, Md., June 10, 2011 /PRNewswire via COMTEX/ -- American Capital Agency Corp. (Nasdaq: AGNC) ("AGNC" or the "Company") announced today that its Board of Directors has declared a cash dividend of $1.40 per share for the second quarter 2011. The dividend is payable on July 27, 2011 to common shareholders of record as of June 23, 2011, with an ex-dividend date of June 21, 2011."
Take the money you got from the sale of IVR on the 6/15 ex-div, and buy AGNC on 6/20 (settlement date of your IVR sale and the day prior to AGNC's ex-div and get the AGNC dividend as well. Threading the needle, but I've done it many times in the past. The dividends arrive in your account at the end of July.
This has served me well in the past when stocks declare at the right times. I'll change strategy after this "cycle" and feel safe in waiting a month or so, as these companies are locked into the divs they declared.
No problem, I'm a trader and usually don't dabble in these kinds of stocks and that was the reason for the initial question. I was thinking of taking a short position going into the EX-div date, you did address that in your last message. The patterns in this stock seem very repeatable just before and after the EX-div date. I was looking into short and long positions trading around those patterns and not having to leave a large amount of cash in the stock for an extended period of time to capture the dividend.
Thanks for the response, good luck.
Sorry to zing you Matt. Usually I try to be helpful and explain concepts to newbies, but people are lazy when so much info is out on the internet and then frequently you can get misleading answers.
Now your second question shows that you are not a novice. On the ex-div date, the market maker for a stock that is going ex-div will automatically mark down the stock by the amount of the dividend, but that doesn't necessarily mean that the stock will finish down that day. Many mREIT investors use the ex-div date to buy the stock at the lower entry point which is why you frequently see the price rise during the day from the initial lows. Of course, some are selling the stock since they captured the dividend. Then you are right in noticing that these stocks tend to move up going into the dividend announcement date. A few of these mREITs, like IVR and AGNC are paying huge dividends so many have figured out these patterns and are trying to play them accordingly. I would suspect that there are some dividend capture mutual funds doing the same. So far I have been content to hold for the dividend, but I have been looking at different option strategies. For example, since the dividend reduces the stock price (at least temporarily) the price of a put option should increase on the ex-div date, but the nearest strike price may already have that priced in. For example, the 22.5 strike on IVR is over $1, but the $20 strike is trading around 10-20 cents.
The other issue you hear about frequently on mREITS is the topic of secondary offerings, but I'll leave that for another time.
2 very good points.....while I use a lot of naked puts, from time to time, I buy the stocks and hold for several days, weeks or in these cases about 2 months...the part about not having your money tied up is most important!!!! Generally like to wait at least 3 to 4 weeks after ex-div date to acquire the stock, then ride it up till about a week before the actual ex-date....many players in this sector have spoken of plaing it this way........others will by calls at the same time I suggested acquiring the shares and then hold for that $1.50 to $2.00 move in the stock
Some of us try to do it as you suggest. Capital gains, in my case, are more convenient than dividends. Also, if you do not rush to repurchase, you do not keep your money constantly exposed to the market.
I did look it up but thought it would be nice to hear from investors that are experienced trading these kind of stocks. Thanks to the other two posters for the help. It must be nice to have total knowledge of the markets and stocks and not need any help or advice.