Expert: Steve Hach - 4/13/2010

Question
I would like to buy and sell periodically to try to capture dividends, but I am confused by when to sell. They list ex-dividend dates, payment dates, cash records dates,cash declared dates, etc. what do they mean and what date should I use to sell a stock and still capture the dividend. Currently, I am long and short on high dividend stocks for safety sake. Is that a viable strategy?

Answer
Hi Bill,

Buying and selling stocks just to get the dividend around the dividend dates is not a viable strategy.

If you go here:  http://www.investopedia.com/ask/answers/137.asp

You will see why this doesn't typically work.

Here: http://www.investopedia.com/articles/02/110802.asp

is an explanation of the dates and such

As far as your strategy, I am not sure what you mean.  Shorting is typically tough for all but the most savvy investors.  Shorting is also exceedingly difficult during strong market rallies like we have seen since March 2009.  In bad times, the stocks paying high dividends would tend to be the most favored, thus I am not sure that they would tend to go down as much as the weaker stocks and this is an issue with your strategy.

If you are looking to hedge your portfolio against a downturn, then for most investors the easiest way to manage risk is with a simple negative index ETF.  You allocate some capital to this ETF so that if the market dives you have some protection.

Watch out though, many of the ETFs might be "double short SP500" or "Triple short DOW."  These sorts of ETFs are designed for traders and are NOT meant to be held for a long duration.

Best,

Steve