Do you buy a stock to get the dividend?

[mini696]

Just a quick question (or three).

Is it sound strategy to purchase a stock which is about to pay out a dividend (before the ex-date of course) then sell it afterwards?

What do stocks tend to do around the payout time?

If you were holding the stock prior to the ex-date then sold it before the payout date, do you still get the dividend payment?

 

[Tradesurfer]

In theory, if say a stock is trading at $20 and on the ex-date it pays a 20 cent dividend. The share price should be reduced by the dividend amount to $19.80. So again in theory since they are shedding assets, the share price gets reduced.

I'd never claim to be a tax expert(especially Australian Law) but in the US if your holding something in a taxable account then the dividend is taxable.

Now as far as what actually happens to the price, remember markets are about supply and demand so prices may not open quite as crisp and clean from one day to the next but hopefully that gives you a very broad answer and again someone more familiar for obvious reasons than me with Aussie Tax treatment of dividends can chime in.

 

[RamonR]

If you were holding the stock prior to the ex-date then sold it before the payout date, do you still get the dividend payment?

Yes, but unless you have held the stock for 45 days prior to going ex dividend you are not entitled to claim the franking credits

 

[SilverRanger]

Nowadays you can buy stocks with decent dividend yield which is higher than term deposit rates, plus you get the benefit to inputation credit and potential capital gains, so that in itself is not a bad strategy at all

 

[beamstas]

Yes, but unless you have held the stock for 45 days prior to going ex dividend you are not entitled to claim the franking credits

This is wrong
You can claim up to $5000 worth

 

[RamonR]

This is wrong
You can claim up to $5000 worth

Not if you have earned more then that.
The holding rules does not apply if earned less then that but if you earn more then that I don't read it as being able to claim $5000 of it.

 

[jono1887]

Yes, but unless you have held the stock for 45 days prior to going ex dividend you are not entitled to claim the franking credits

I thought it was 30 days.

 

[RamonR]

it is 45 days
there is a very good pdf file available at ATO website called you and your shares which eplains it all really well.

http://www.ato.gov.au/content/downloads/IND00191825n26320609.pdf