Dividend Capturing: a first look at this strategy

Let's start by immediately admitting that the dividend capture strategy when strictly applied does not work. Period. If it did, everyone would be doing it constantly. It doesn't and everyone isn't. With that out of the way, let's see how my kick-at-the-dividend-capture-can played out.

I decided to buy a solid dividend-paying stock a few days prior to the ex-dividend date. Sticking strictly to the rules of the strategy, one buys the stock in question on the day before the stock's ex-date. I prefer buying two days, or a little more, prior to the ex-date.

The goal is to be a shareholder on the ex-date. This guarantees one is a shareholder of record on the record date, which is often the day after the ex-date. At this point, as a shareholder of record, you have captured the dividend. The dividend is yours. Period.

Key terms to understand:

Declaration Date

This is the date a company announces it is paying a dividend. The declaration statement includes details such as the value of dividend, the record date and the payment date.

Ex-Dividend Date (or Ex-Date)

In order to receive the next scheduled dividend, you must own the stock before this date. If the stock is purchased on or after the ex-dividend date, the buyer will NOT receive the upcoming dividend. The day before the ex-date is said to be the last day one can buy a stock and still be eligible for the coming dividend. I have been told buying the stock in question two days before the ex-date adds a margin of safety.

Record Date (or Date of Record)

By the end of the business day on the record date, you must be on the company's books as a shareholder of record to receive the dividend. The record date is usually the first business day after the ex-dividend date.

Payment Date

This is the scheduled date on which a company will pay a declared dividend to shareholders of record.

Recently, I tried this strategy with Telus (T). Why Telus? Well, today Telus is boasting a five star rating from Morningstar. Other sources rate Telus a "Strong Buy". If I cannot sell the Telus stock quickly for a fast profit, I can hold it and not lose sleep. One could do a lot worse than holding Telus. In fact, I am already a holder of Telus.

How I played the dividend capture strategy with my recent Telus purchase:

• Thursday, November 30: I bought 1900 shares of Telus at $23.90 for a total of $45,419.99.
• Friday, December 8, 2023: ex-dividend date. I was a shareholder.
  
• Monday, December 11, 2023: I was a shareholder of record date. Shares were selling for $24.87.
  
• Tuesday, December 12, 2023: Shares selling for $24.65. I could sell for $46,825.01. I'm holding.
• Wed, December 13, 2023: I could have sold 1900 shares of Telus at $24.94 for a total of $47,376.01 and $1956.02 profit thus far.
  
• Tuesday, January 2, 2023: I will collect a $714.40 dividend payment
  

Total profit for this play could have been $2,670.42. The way this really played out is much different. I figured Telus would continue to climb in price. It didn't. I held and Telus dropped below the price I had originally paid. By December 15th, I was in the red. I should have stuck with the original dividend capture strategy. Oh well . . . I will collect a very nice 6% plus dividend while I wait for the stock to recover and it will.

The table below shows the key dates:

Type	Declaration Date	Ex-Dividend Date	Record Date	Payment Date
Date	November 3	December 8 (Friday)	December 11 (Monday)	January 2, 2024
Note	A dividend of .3761 is announced.	One must own Telus shares before this date to be entitled to the dividend.	At the close of business on this date, one must be on the Telus books as a shareholder in order to receive the dividend.	The date the dividend is paid to shareholders.