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How to time trades & ex-dividends
Howdy Y'all,
This is my first experience with trading a stock (NCT) near it's ex-dividend date. I'm up 20% on the stock in 10 days, with only 8 days before the ex-dividend, which is currently .25/share. The price typically drops the amount of the dividend 3 days before the ex-dividend (due to 'being on the books'). I don't expect the stock to go much higher than it currently is due to the current market. Do I hold onto the stock through the ex-dividend date or sell 3 days prior when it peaks? This isn't so much about trading this particular stock, but how to deal w/ trades in this situation. Also, what would make this trade situation different during a bull market?
Answers
788 points
DaveDiggz answered one year ago …
The thing to remember is that the stock drops because YOU, the shareholder, are receiving that same amount as a dividend anyway. So the stock really isn't declining, you're just taking some profits off the table.
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2775 points
Oldman answered one year ago …
I don't know if this security is in a taxable account, and if it gives "tax-qualified" dividends. If the answers are yes, then to get the "Qualified dividend rate of 15 %" you must hold the security for 60 days after the dividend date. When you get your 1099, next Jan., from the brokerage, if you didn't hold the security for the 60 day ex-dividend period, even if the 1099 indicates a qualified dividend, you would need to "adjust" the dividend to "ordinary" (i.e., taxable at marginal rates) when filing that return.
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