How I go about Dividends as a Trader!Q. “In your view how do you go about with dividends as a trader and as an investor? Do you buy to chase dividends when they are declared or not?
A. As a position trader (short term holder), I'm not really interested in buying companies for the dividends released.
That’s because I prefer to make money in the short term with the trades I take, according to my short term strategy and analysis.
But if I did have an investor mentality and I wanted to take advantage of buying companies for dividends, I would do a number of things.
These include:
First I would do my own thorough research and due diligence on the company's overall financial health and performance.
Second, I would look at the dividend history of each company to see more or less what I would have earned over the last couple of years.
Also, if you look at the history of the dividend, it will help you determine whether it's a reliable company to buy.
I personally don't believe it's a good idea to chase dividends with stocks.
I have also never met anyone that makes money chasing dividends in the short term.
The problem is when the dividend is released, the share price tends to drop quite significantly.
And you could end up losing more money because of the share price drop, rather than the money you gain through the dividends.
This means, you could be stuck holding onto the shares and positions for the next couple of weeks or even months, waiting for the price to recover.
Reply: *Hey Timon, thanks for comprehensive respond. It cleared my confusion as a trader when it comes to dividends.
