High Yield Dividend Stocks --- How to Get The Dividend Before The Dividend Payment Date

High Yield Dividend  Stocks --- How to Get The Dividend Before The Dividend Payment Date


Let us assume  that the dividend is not too high, so that it is not considered a special dividend (Special dividends are dealt with differently). In general, stock investors who  buy it stock on the day before ex-dividend  are eligible for dividend, as their names would appear on the date of record, which is a couple of days after the ex-dividend date  (there is typically a delay between the trade date and the settlement date, which changes from country to country, and can change with changes in rules and regulations). The payment date is usually sometime in the future after the ex-dividend date.

Is there a way to get the dividend earlier than the payment dividend date?

Holding a stock synthetically means buying a call option and selling a put option. If one assumes zero interest rate, prior to the ex-dividend date the price of the at the money  (ATM)  call MINUS the price of the ATM  put should be equal to MINUS the discounted value of the dividend. On the ex-date, the options should be priced without the dividend priced in, and the price of the ATM call minus the ATM put should be  equal assuming there is no other dividend between the ex-dividend date and the option expiration date, and of course assuming zero interest rates. If interest rates are significant, the ATM call minus at the money put should be equal the interest carry cost.

So essentially the synthetic stock appreciates by the amount of the dividend on the ex-dividend date, and therefore capturing the dividend on ex-dividend date before the payment date.

Typically stocks fall by the amount of the dividend on the ex-date, which leads to an interesting question: is it worth to try to capture  the dividend? There might be surprises in the answer to this question.