It is not possible to get companies to pay you dividends before Ex-Dividend dates. That said, I would like to share with you guys some active steps to earn dividends equivalent or more than annual distribution in less than 365 days. Here are my thought processes and methods to achieve it.
1. Reframing the idea of Dividends
Dividends are just rebates from your stock purchases. Nothing is further from the truth, you should never treat dividends as interest payouts. Read here for post on “understanding dividends”. As for the rest of us, realised profits can be treated as the identical product as dividends.
X cents profit (after comms) = X cents dividend payout
What I am trying to stress is that, it is not always wise to leave your money vested in the market when you can actually earn the same amount in a shorter time frame.
2. Set profit targets as dividend payouts after comms
| Comparison between profit and dividend | Profits for selling shares (Day 150) | Actual Dividends (Day 300) |
| Buy Price | $1.00 | $1.00 |
| Sell Price | $1.05 | Not Applicable |
| Commissions (if any) | 0.71 cents | Not Applicable |
| Cash Received (profits or dividends) | 4.29 cents | 3.75 cents |
The table demonstrates that you can actually make a profit of 4.29 cents per share on day 150 as compared to waiting for day 300 before getting 3.75 cents per share as dividends. My take on the matter is that there are plenty of opportunities to sell at a profit higher than actual dividends and perhaps seizing such opportunities would be wiser for some.
3. When does this method not make sense?
This is obviously not going to make “CENTS” for some (pun intended). Reason being that some of us purchase at small volumes or dollar amounts and hence the commissions will be too overwhelming for us to sell before dividend dates. To that I propose that you should follow the dollar averaging method in investments (Click here for more details).
Minimally, your share volume or order amount should follow the following table values.
| Recommended volume per order | Recommended Capital per order | |
| Share Price of $0.50 to $1.00 | 10,000 | $5000 to $10,000 (Exclude comms) |
| Share Price of $1 and above | $10,000 divided by share price (round up) | $10,000 (Exclude comms) |
With larger volumes, your profits will be substantial enough to make trades for profits before even waiting for dividend payouts. Otherwise if you have bought into the share at a bad time, you can either pull out completely or wait for your dividends.
4. Epiphany of Trading vs Investments
Our Decisions should always make sense, some people are so passive that they missed out on 4-5 years worth of dividend in less than a year of investments. Therefore, I am not suggesting that we should all sell once our shares have yields higher than our annual dividends. After trading the same share for a while, you will recognise the volatility of the particular counter to make more informed decisions.
Closing Thoughts
I strongly feel that “money is money” and since we are all involved in the markets together, we should face the hard facts that our decisions should make the best out of our vested capital. Besides greed, many investors also face an issue about denial and I think that should be resolved as soon as possible.
