Dividend Investment Strategy
Every other month or so, I will use his Big List, copy the contents of the several tables of dividends that bear 2% to 20%, paste them into Excel, them sort them by percentage return. The next step in my strategy is to look at the highest yielding stocks, ignoring funds, and figure out which have share prices and dividend yields that would provide a minimum return on investment; this minimum varies on how much I have to invest at the time, the buy and sell commissions. This cuts the list down to about 25% its original size with about 15 minutes worth of effort.
My next step is to eliminate those that are not traded on ShareBuilder. Now that I gotten the list whittled way down, it is time for the time-consuming research; I remove those from the spreadsheet that have not yielded dividends in the recent past and I start noting in my spreadsheet the number of past consecutive dividend periods and the last 12 months worth of declaration dates, ex-div dates, record dates, dividend amount, current share price and dividend payout dates for each stock. Not all of them are quarterly, some are monthly and some just annually. The next step is charting out the currently declared ex-div and record dates, along with the yields.
Now, I have a schedule for the upcoming month or two for stocks that I will use for deciding which stocks to invest in; making sure that I have sufficient time between their ex-div and record dates to allow for such issues as stock price drop due to the dividend and settlement dates for the buying and selling.
Before buying a stock, I look for the obvious price trends to make sure that I do not pay more than I estimate is realistic to net the return that I want. If the price is close to or just below a 50-day moving average, and nothing in the news looks awry, then I purchase the stock using a buy limit, as it is usually way after the close of market for the day when I can allocate enough attention to this. By the time I decide to buy the stock, I also have estimated a reasonable sell price for two different scenarios - selling before the ex-div date for a reasonable percentage gain over what I would realize by holding until the dividend and holding long enough to realize the dividend. The gains either way are taxed differently, so I keep this in mind as well.
Once I have received the dividend, I then proceed in one of two directions, depending on the trend of the stock in regards to what I have paid for it.
If the stock is performing well, I may decide to keep 5 to 10% of the shares, and calculate a sell price for the other 90 to 95%, keeping in mind commissions and volume surcharges, so the final result is that I end up owning some shares of the stock at no cost, effectively free stock plus the dividend as income.
If the stock is not performing so well, as many of them are, I will just hang onto it until the next natural upswing in price or sell it short of making a gain, if I still manage to retain at least 50% of the dividend it has earned.