Quote:
Originally Posted by auctionjmm
You skipped a very important step. That equity is also adjusted UP prior to the dividend.
Say a stock is trading at $50. A $1 dividend is announced. The stock will typically go up to $51. After the dividend goes out, the stock adjusts back down to it's normal $50. So yes, you did actually gain that $1. The only people who would be offset 1:1 are those who bought in when the price was temporarily adjusted up. I suppose in the example above, buying on 10/26 would be too late. But if he bought earlier a the $50 clip, he could cash out with his 2% profit.
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It’s not this simple and doesn’t work like this in real world markets because there are so many other factors that determine stock price that supersede dividend announcements.
There is no real trading strategy here. There is usually a couple months between declaration and payout during which many things happen.