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Recently I sold 3006 DLS shares the day before the ex-dividend date.

On the ex-dividend date, for the same amount of the sale, I bought 3052 DLS shares.

I have therefore gained 48 DLS shares.

So how have I not gained? I have 48 extra shares at the ex dividend price, whatever it may be.

Thank you for your response.

Another example is VHT, ex-dividend date 21st June

Shares X div yield $1285. By selling pre dividend date and buying back on the dividend date net amount of shares were 14.5 @ $173.93 = $2521. I guess you win some and lose some, however I simply bought back at the market opening.

However my real reason to do this is that I am not subject to U.S. capital gains tax, but I am liable to a withholding tax of 30% on dividends.

So I suppose I gain by avoiding withholding tax.

Brythan
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Corvo
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2 Answers2

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You’ve gained 48 shares, but you’ve lost the dividend your 3,006 shares would have paid if you’d just kept them. Assuming the markets have priced it correctly, which they usually do, those are worth pretty much the same and your net gain is zero.

Mike Scott
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Stock exchanges reduce share price by the exact amount of the dividend on the ex-dividend date so if one does nothing and the security is held in a non sheltered account in the U.S. then all one would gain would be a taxable event and negative total return.

In a perfect world where you could sell at the close on ex-div eve and buy at the adjusted close the next morning, you would end up with more shares at a lower price but the same positional dollar value, excluding slippage and commissions. In the case of DLS, that would mean an extra 54+ shares.

However, it's not a perfect world and the security can open higher or lower in the morning due to buying or selling pressure. You netted fewer shares because you can't trade at these exact prices. No big deal..

What did you gain? As intended, you avoided the withholding tax of 30% on dividends.

Bob Baerker
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