If you are not familiar with surfing, the process is pretty simple to understand: you paddle out, wait for an appropriate wave, catch the wave, and start the whole process over again. Overall, a surfer typically spends more time in preparation for that perfect wave than the actual act of surfing.
For those fortunate enough, they do have tow-in surfing for the bigger waves, which is basically a personal watercraft (or helicopter) with a tow rope that not only helps the surfer get back out to the waves faster, but also helps the surfers get up to speed with some of the larger waves out there.
The point of this little digression is that if you are a buy-and-hold dividend investor, owning a dividend paying stock is kind of like surfing. You invest in a company, wait out the volatility of the market, suffer through unexpected company news, and after a specified time (usually three months), you will get a cash dividend and have some sort of unrealized gain or loss. If you are a typical dividend investor, this process may work well for you, much like the casual surfer who comes out for a relaxing weekend experience.
However, in the same way that more professional surfers use personal water craft to catch the larger waves and maximize their surfing time, dividend investors can also maximize the amount of dividends they are receiving by using a dividend capture strategy. Rather than holding the stock for the entire three months waiting for that one dividend check, an investor can own the security for a shorter period of time just to take advantage of the dividend disbursement. After that, the investor is free to look for additional dividend opportunities in order to spend more time collecting cash, and less time waiting for the next dividend three months out.
At Hunting Dividends, our service to our clients is to provide professional analysis on exactly which dividend stocks are best suited to this strategy, and provide a guide to navigating the trades so that you spend more time collecting checks and less time doing research.
Sidenote: By no means are we discounting the buy-and-hold dividend investor. As stated elsewhere in this site, diversification is a key part of a successful portfolio. The dividend capture strategy is a higher risk, higher maintenance, and higher reward methodology that is not cut out for all investors or portfolios. However, if you are looking to add diversification and willing to deal with a little more potential risk, this strategy may be for you.
If you are serious about using the dividend capture strategy, we highly encourage you to subscribe to our newsletter. You can sign up by clicking here.
-The Hunting Dividends Team