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Stock market noob here.

Can I invest in a stock prior to it's ex-dividend date, then sell after and still get the dividend payout?

Let's say for example the ex-dividend date for Stock ABC is Aug 31st. Can i buy stock in it Aug 30th, turn around and sell Sept 1st and still get the dividend payout?

Is there any benefit to buying the stock way earlier -- say, in January?

Thanks for the responses!

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You can do that, and yes you'd get the divident payment, but you'll find that on average the price of the stock will decline by the dividend amount once it goes ex-dividend so you'll not make any money by doing this.

In fact you'll likely lose money once you take transaction costs into account.

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  • Transaction costs... you mean from the broker ? – tshoemake Dec 30 '19 at 17:42
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As described, you would still receive the dividend.

As long as you hold on the close of the day prior to the ex-dividend date, you will receive the dividend.

You can also sell it on the open of the ex-dividend date too. So, in your example, you could sell it on the open of Aug 31st.

There is no dividend-related benefit to buying the stock earlier, but some countries have rules regarding holding periods and receiving franking credits such as Australia, requiring a holding period of 45 days: https://www.ato.gov.au/Forms/You-and-your-shares-2019/?page=10

Also note that it is common for the stock to drop by approximately the amount of the dividend on the ex-dividend date.

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There were 2 questions.

Can I invest in stock prior to its ex-dividend date, then sell after and still get the dividend payout?

A detailed explanation can be found in this article : Dividend implications. If you are thinking of getting the dividend and selling the stock its price is adjusted price, it is not going to happen. There is a chance that a few careless investors forgot to adjust the bid price with an automated system, but usually, those systems will notify the investor.

Is there any benefit to buying the stock way earlier -- say, in January?

Short answer: You cannot go very wrong if you buy low based on fundamentals.

Long answer: If you buy based fundamentals and think the stock price is below market value (e.g. a Price Earning ratio below 15) and the company has positive cash flow, little debt, etc., then you will not lose money unless the company cooked their books like WorldCom, Enron, etc.). On the other hand, if the stock is volatile due to speculation, then the investor must watch out for signs of an overpriced stock (a P/E ratio higher than the industry average).

Note that it is not illegal for a public listed company to pay out dividends if is not making profits. So investor must always watch out for fundamental than blindly walk into the dividend payout trap.

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  • "many people will speculate and push the stock higher than the particular industry average market value." This is not the main reason that dividend stocks fall after a divdend is paid. There may be some extra demand when a dividend is coming but it's not the main point of the linked answer. – D Stanley Dec 30 '19 at 13:30
  • @DStanley The sentence doesn't suggest the price fall but suggests a hike before the ex-dividend, i.e. to prey on the herd investor. – mootmoot Dec 30 '19 at 13:40
  • I understand that, but I don't see evidence of that in the linked answer nor have I seen research to that effect elsewhere. – D Stanley Dec 30 '19 at 13:43
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    Fixed income stocks are more likely to rally into an ex-div dates. Common stocks are more likely to be primarily affected by the direction of the market than by purchases for the intent of receiving a dividend. The ex-div date price reduction occurs regardless of all other factors. – Bob Baerker Dec 30 '19 at 13:53
  • @DStanley : I have edit out the part. I think Bob Baerker clarify it. – mootmoot Dec 30 '19 at 14:25

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