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Investing Ideas: Dividend Capture

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While trading in the market, we usually come across news that sone XYZ company has declared dividends.

Can we make some immediate profits with such news??

Let’s understand everything in detail.

What is a dividend?

Logically, Shareholders are partners of the corporation. So, they have equal rights to the profits made by that corporation in a quarter or be it annual. Thus, the dividend is the distribution of profits made by a corporation to its shareholders.

Also Read: Investment Ideas for retail Investors: Thematic Investment

Here it is to be noted that all corporations do not declare dividends, even if they make profits. This is because the corporation re-invests the gain in its business to expand or clear existing dues, which in turn benefit the shareholders as the corporation seeks to make more profit in the future.

Public companies usually declare dividends at fixed schedules; they might also declare special dividends, showing that the company is doing better than expected, which in turn boosts investors’ morale.

It should be noted that when a company declared dividends, it is given on the Face Value of shares and not on the Current Market Price (CMP) of shares. For eq, If XYZ company shares are trading at 100rs and its face value is 1rs. If XYZ declares a dividend of 100%, it means shareholders will get 100% of Face value, i.e., 1rs per share.

Dividend Timeline:

To make profits from dividends, we must understand the dividend timeline correctly;

  • Declaration date: The board of directors announces dividend payment. This is the date when the company declares its dividend. It occurs well in advance of the mortgage.
  • The ex-dividend date (or ex-date): The stock starts to trade without the dividend. This is the cut-off day for being eligible to receive the dividend payment. It’s also the day when the stock price often drops in accord with the declared dividend amount. Traders must purchase the stock before this critical day. You will not receive a dividend if you buy stock on this particular day.
  • Date of record: Current shareholders on registration will receive a dividend This is the day when a company record which shareholders as eligible to receive the bonus.
  • Pay date: This is the day when the dividend is paid, and the company issues dividend payments.
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Here, it should be noted that; it takes T+2 business days for a trade to complete. So, considering this, there is a gap of exactly two business days between the Ex-dividend date and record date.

Strategy to make profits:

The strategy is straightforward, it is widely known as “Dividend Capture.”

The dividend capture strategy is based on an investment technique that focuses on quickly capturing the dividend issued by a corporation, without intending to hold the investment over a long period.

It simple because the trader does not have to go through technical and fundamental analysis to execute dividend capture effectively. A trader or an investor purchases shares of a company after the dividend is declared. Usually, it is done a couple of days before the ex-dividend date. On the ex-dividend date, traders sell the stocks. Thus, they end up getting up declared dividends and also capitalize on any price gain from the shares.

Let’s understand with a recent example:

ITC declared a 10.15rs dividend per share on 26 June 2020. The Record date was set to be 9 July. So, traders had to buy it on or before 7 July to get dividends of the same. The dividend will be credited to shareholders’ accounts on 8 September.

Note:

1. Once the dividend is declared, share prices surge upwards to consolidate the number of bonuses.

Let’s consider the ITC example again.

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As we can see, ITC gained nearly 14rs from the declaration date to the ex-dividend date. After ex-dividend, the stock fell back to its average trading value and continues to trade further. So, timing the entry and the exit of stocks is significant.

2.  Brokerage charges and Depository charges are also to be considered while planning to capture a dividend.

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3. Few countries may charge taxes on income via dividends. Fortunately, India has exempted income by profits from taxable income.

Dividend Capture Opportunities in near Future:
 DIVIDENDDATE
 PercentageAnnouncementRecordEx-Dividend
Kemp and Co5.0029-06-202021-09-2020
Kkalpana Ind6.0029-06-202021-09-2020
Creative Periph5.0025-06-202020-09-202019-09-2020
Kamdhenu5.0029-06-202018-09-2020
Apollo Hospital55.0025-06-202017-09-2020
Berger Paints30.0023-06-202017-09-2020
Goldiam Inter15.0025-06-202017-09-2020
Intl Conveyor20.0013-07-202017-09-2020
The Indian Wood5.0003-07-202017-09-2020
Jindal Saw100.0029-06-202017-09-2020
Dhunseri Ventur5.0003-07-202016-09-2020
Punjab Chemical15.0029-06-202016-09-2020
Rossell India10.0029-06-202015-09-2020
Talbros Auto5.0029-06-202015-09-2020
FIEM Ind30.0030-06-202011-09-2020
Victoria Mills50.0030-06-202011-09-2020
HLE Glascoat25.0022-06-202010-09-2020
Tamil Newsprint60.0030-06-202009-09-2020
Guj Hotels25.0008-06-202008-09-2020
Rajapalayam10.0024-06-202009-09-202008-09-2020
Hind Rectifiers40.0026-06-202007-09-2020
Subros40.0029-06-202007-09-2020
Sika Interplant11.0029-06-202003-09-2020
Surya Roshni20.0025-06-202004-09-202003-09-2020
Electrosteel30.0015-06-202031-08-2020
Sarthak Metals5.0022-06-202031-08-2020
Josts Engineers30.0016-06-202028-08-2020
Abbott India1070.0008-06-202028-08-2020
Abbott India1430.0009-06-202028-08-2020
South (I) Paper15.0025-06-202028-08-2020
Greenply Ind40.0029-06-202027-08-2020
Munjal Showa225.0030-06-202027-08-2020
Bannariamman100.0024-06-202025-08-2020
Dollar Ind85.0029-06-202024-08-2020
SHIL7.5024-06-202024-08-2020
Indian Hume100.0029-06-202021-08-2020
Tide Water Oil2800.0024-06-202021-08-2020
Lumax Inds60.0018-06-202020-08-2020
Sky Industries5.0008-07-202020-08-2020
Stanrose Financ60.0029-06-202020-08-2020
Thejo Engg50.0018-06-202020-08-2020
Unichem Labs200.0019-06-202020-08-2020
Everest Ind10.0029-05-202020-08-202019-08-2020
GMM Pfaudler100.0005-06-202019-08-2020
Heritage Foods50.0027-05-202019-08-2020
ADC India Comm20.0020-05-202019-08-2020
Lumax Auto Tech50.0017-06-202019-08-2020
Can Fin Homes100.0015-06-202018-08-2020
Clariant Chem110.0017-06-202017-08-2020
Cummins350.0017-06-202018-08-202017-08-2020
Hindcon Chemica9.0025-06-202017-08-2020
Century30.0010-06-202014-08-2020
GPT Infra15.0022-06-202013-08-2020
Birlasoft50.0020-05-202014-08-202013-08-2020
Maruti Suzuki1200.0013-05-202013-08-2020
Anjani Cement50.0029-06-202013-08-2020
Ponni Sugars(E)40.0029-05-202011-08-2020
Alkem Lab150.0005-06-202011-08-202010-08-2020
Universal Cable20.0001-06-202010-08-2020
Vindhya Telelin100.0001-06-202010-08-2020
Navin Fluorine150.0016-06-202007-08-2020
Vishnu Chemical10.0002-06-202006-08-2020
Lakshmi Elec5.0003-06-202006-08-2020
NGL Fine Chem35.0029-06-202007-08-202006-08-2020
Rane Holdings40.0024-06-202007-08-202006-08-2020
Sukhjit Starch20.0012-06-202006-08-2020
Tata Steel100.0029-06-202006-08-2020
Whirlpool50.0018-06-202006-08-2020
YASH PAKKA LTD10.0022-06-202007-08-202006-08-2020
Cravatex10.0030-06-202005-08-2020
Goodyear130.0012-06-202005-08-2020
Granules India25.0002-06-202005-08-2020
Larsen400.0005-06-202005-08-2020
Shilchar Techno10.0029-06-202005-08-2020
Voltas400.0029-05-202005-08-2020
CRISIL0.0013-07-202005-08-202004-08-2020
JSW Energy10.0020-05-202004-08-2020
JMC Projects35.0019-05-202004-08-2020
KELTECH Energ15.0026-06-202004-08-2020
Polyspin Export6.0025-06-202005-08-202004-08-2020
Disa India25.0003-06-202003-08-2020
Kaycee Ind30.0009-06-202004-08-202003-08-2020
Bosch1050.0022-05-202003-08-2020
Titan Company400.0008-06-202003-08-2020
Eimco Elecon50.0025-06-202031-07-2020
Kuantum Papers25.0003-07-202030-07-2020
Balaji Amines30.0022-06-202030-07-2020
Bombay Cycle50.0030-06-202031-07-202030-07-2020
Century Enka80.0009-06-202030-07-2020
Essel Propack102.5022-05-202031-07-202030-07-2020
Gabriel India85.0019-05-202030-07-2020
Hero Motocorp1250.0009-06-202030-07-2020
HUL0.0013-07-202031-07-202030-07-2020
Khaitan Chem20.0022-06-202030-07-2020
Kriti Ind15.0029-06-202030-07-2020
Kriti Nutrients18.0002-07-202030-07-2020
Matrimony.com30.0020-05-202031-07-202030-07-2020
Orient Electric50.0001-06-202030-07-2020
Alembic30.0026-05-202029-07-2020
Bata India80.0026-05-202029-07-2020
GM Breweries30.0023-06-202029-07-2020
Morganite India160.0016-06-202029-07-2020
Gujarat Pipavav35.0009-06-202029-07-2020
Novartis India200.0019-06-202029-07-2020
UltraTechCement130.0020-05-202029-07-2020
Mahindra EPC12.0015-05-202028-07-2020
Granules India25.0017-07-202029-07-202028-07-2020
Hatsun Agro0.0013-07-202029-07-202028-07-2020
Rane Brake110.0017-06-202029-07-202028-07-2020
SOLARA ACTIVE P20.0007-05-202028-07-2020
Seshasayee Pape175.0001-06-202028-07-2020
Seshasayee Pape25.0002-06-202028-07-2020
Bayer CropScien250.0022-05-202027-07-2020
Nitta Gelatin25.0008-06-202027-07-2020
Trent100.0026-05-202024-07-2020
Polychem125.0013-07-202024-07-2020
Paushak Ltd60.0019-05-202024-07-2020
Strides Pharma20.0020-05-202027-07-202024-07-2020

Also Read: Beginner’s Guide: Introduction to the Stock Market

The percentage of dividend is on the Face value of stocks and not the CMP of shares.

Disclaimer:

Investing in the equity market has the risk of losing capital. The author is not a SEBI registered Advisor. Please do your research before investing directly in the market.

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