Dividend chasers.... are there any out there at all ?

19th Sep by Matt Carroll

2 comments 317 reads

I suspect I am having a bit of beginners luck, but I have so far achieved 12% on my SIPP since April this year. I tend to look for stocks that have a fairly decent dividend, buy them, wait for the dividend then wait for them to bounce back and then sell them. I then rinse and repeat this. I have been lucky in a few purchases where they got an offer of a take over and had a nice little jump in price, so sold up and used the gain to buy others. I have got a couple that have yet to bounce back fully and I will just sit on them and watch them slowly creep back up whilst taking the dividends. I have, since April had 6.75% in dividends and 5.6% realised gains on my pot. I have the dividends reinvested and will hold on to them to build up a little port folio of stocks and the gains, along with the interest of the cash when it is there, is used to make the purchases.

Just wondered if anyone else does this or do people tend to just buy stocks to sit on them super long term.

Just fyi, my new pension is invested in funds and has a healthy regular contribution going in to it, I am simply using the pot from my previous employer within this new SIPP to do this with.

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intuitive6191

19th Sep

This sounds like a strategy called dividend capture - which is fairly well recognised so I would imagine that you might get a number of responses to your enquiry.

The key point is to pick shares which are not in structural decline where the rebound becomes harder (if not impossible) to realise.

Welshborderer

I wonder if there is another way of looking at this? I could be completely barking but here goes. One strategy buys shares with the knowledge a partial return of the investment will arrive in due course which can be invested in another holding, or the same, assuming that as it has just been invested it is not required for personal use. Alternatively:

On the day a share goes ex-dividend it ought to be marked down by the equivalent of the dividend to be paid. During that day the same investment as was being considered the day before would now purchase a larger number of shares as if the dividend had already been received and was being reinvested. Over time the share price might drift back up and then a sale before the ex-dividend date would allow for a rinse and repeat.

There is another situation to consider where a share is in terminal decline in a controlled manner. Consider Triple Point Energy Transition (LON:TENT) where the dividend and special dividend have just been taken out of the price, a purchase to day offering many more shares that would have been bought yesterday. As far as I am aware at a cursory glance, certain businesses have already been sold allowing financers to be reimbursed and now much of what remains is being sold in an orderly manner, not a fire sale, allowing those returns to be paid down to investors along the way. This might allow a similar opportunity as above but this time offering the potential for the complete sale to equal or exceed the current share price.

I am sure of one thing, this is not an original thought even if it appears to be to me.

Dividend chasers.... are there any out there at all ?

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Matt Carroll

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