June 23, 2020

Dividend Capture as a Strategy for Small Investors


As always, I am not recommending anyone purchase any particular stock. However, interest rates at banks are far below the rate of inflation. Keeping large amounts of money in your local bank causes the value to decline dramatically, even though the numbers grow ever so slowly. Therefore, I am recommending downloading Robinhood and investing in your favorite company, or perhaps companies. As a small incentive, if you use my link to download Robinhood, open an account, and deposit some money, you and I will both receive one free share of stock worth about $4. Here's my link:

https://join.robinhood.com/brianm3790
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Unfortunately, life seldom goes according to plan. At least, my life never seems to follow the plans I make. Perhaps my ability to strategize and make plans is poorly developed? Perhaps life just enjoys throwing me to the sharks? I don't know. Two unexpected expenses arrived, which I won't go into here, forcing me to sell off my Ford Motor Company stock and withdraw about $620 from my Robinhood account. This dropped my balance back down to an even $500, exactly where I was on December 19th when I first started blogging about Robinhood. I had a couple of options at that point: I could leave everything alone and let my CNOOC shares collect dividends while the valuation followed the tumultuous market we have now, I could withdraw everything and give up completely, or I could play around with Dividend Capture and see what kind of improvement (if any) I could pull out of my meager $500 balance.

I decided to head back to the NASDAQ Dividend Calendar and see what kind of trouble I could make for myself by trying to grab some dividends. "Dividend capture" is a strategy I briefly discussed in two earlier posts. In many ways, it is an ideal strategy for accounts with small balances. This is particularly true of impatient people like myself who cannot simply buy stocks and hold onto them until they die. The two earlier posts where I discuss Dividend Capture are here:

A Curious Development in China and Chinese Oil
Dividend Capture from Three Fossil Fuel Related Stocks

The CNOOC investment itself worked out pretty well for me. I paid $345.81 to buy three shares at $115.27 each. I sold those same three shares for $366.81 at $122.27 each for a net profit of $21.00. I bought the shares on June 1st and I sold them on June 5th. $21.00 is not a huge profit, until you consider it takes about ten minutes to check the NASDAQ Dividend Calendar for a likely candidate, about twenty seconds to place an order with Robinhood (buy and sell, so forty seconds total), and I held the shares for only 5 days. Investing with Robinhood might not be a new career for me, but it is certainly more profitable than half an hour watching television and also far more profitable than a five-day time deposit at my local bank. Additionally, I earned $15.61 in dividends, for a total profit of $36.61. Not bad for a casual hobby that took less than half an hour of my time. In fact, if every deal I ever made on Robinhood worked out this well I would be ecstactic. I wouldn't be rich, but I would certainly feel successful.

Here is the screenshot from my purchase:

Here is the screenshot from my sale:

Here is the screenshot from the dividend award:

Another deal that worked out well was Frontline. On June 2nd I bought eleven shares of Frontline at $8.96 per share for a total of $98.54. I then sold those eleven shares on June 9th at $9.01 each for a total of $99.13. The total profit from this deal was only $0.59. However, by holding onto the shares for seven days I earned a dividend of $7.70. I challenge you to find any bank in America that will pay you $1.10 per day to keep $100 in your savings account, or even in a time deposit. Total profit for the Frontline deal was $8.29. Granted, that's barely enough for a fancy double-shot latte at Starbucks, but it's still better than spending half an hour watching grown men beat each other up over a leather ball.

Here is the screenshot from my Frontline buy:

Here is the screenshot from my Frontline sale:

Here is the screenshot from my Frontline dividend award:

My total profit for these two deals was $44.90. Unfortunately, not every deal turns a profit. I lost a total of $11.20 on a third deal and $3.42 on a fourth, bringing my net total for the past month down to about $30. So, thirty dollars for about two hours work in my spare time while sitting on my sofa listening to some relaxing Hawaiian ukulele background music. All told, that's not bad for two hours work. Even better, there is no bank in the entire world that would pay me $30 interest on a one-month time depost of $500. Using Robinhood and Dividend Capture is not going to make me rich. That much is true. On the other hand, it certainly is a profitable way to burn a couple hours here and there. Also in the plus column, it keeps my brain alive as I research which companies to invest in and try to decipher the mysterious workings of our tumultuous, AI-driven stock market.