l am using a new approach this year 2012 on getting paid in advance on the dividend amount. Which is actually all about selling a stock at no loss before or after its ex-dividend date. What is the time frame of being paid in advance? IMO, this can be in the range of a few days to one year, to its anticipated ex-dividend date. Below is the example.
Selling with gain on a stock in advance of its ex-dividend date is not really trading or investing on the basis of speculation. This is because there is already a target selling price to exit to begin with.
The dividend rate is not always the same quarter-to-quarter or year-on-year unless it is the-like of SingPost. But it is really a good gauge to form the target selling price to exit.
If the stock price goes south after ex-dividend then l can have the choice of offsetting the dividend amount received and selling the stock at gross loss but still profitable with nett gain - dividend amount received less away realised gross loss. Each investor has his own preference. l do not wish to subscribe to this offsetting strategy though; probably not yet - which means not for now. Except for Reits, there are many companies paying dividend but l am eyeing those that are not fundamentally rotten to the core. This way, if the stock price goes deeply south upon ex-dividend l can still hold at next exit opportunity, probably at breakeven; as there is no danger that the company is getting into a going concern issue over the next few months.
In the illustration, if l limit my investment amount in the range of $2k then l can buy 5 lots of LippoMalls at price of 0.395. Hence l can actually anticipate dividend amount of $53 or $55.50 using past dividend payout as basis and assuming that its ex-dividend date is same as last year, on 22 Feb. So, here l have set my exit selling price to be at $0.415 and it is only $0.02 away from original purchase price.
Setting the exit selling price and the eventual actual selling price can different as the former is not really cast in stone yet. If a stock happen to be wrong purchase then l will target to sell it at breakeven. And also, if the exit selling price later prove to be a tough hurdle to overcome then it is not an unforgivable thing to do by selling it at a slightly lower selling price.
After exiting the stock way before it goes ex-dividend, the price can still run up. But l can tell myself that l have already pocketed the dividend, in advance of its ex-dividend date. And l have no wish of speculative trading. So, no worries really.
Going long into a stock for value investment (say, on Keppel Corpn, Kingsmen, MIIF-MacqIntInfra, SingTel, Starhub, SIA Engineering, SMRT, etc.) is good but one needs to be mindful of getting overly emotional attached over it (be it one or two stocks). This is because it shuts off one's mind of other even better or good opportunities around and blinded of the danger in putting all funds in a basket. In value investment, there is no exit strategy. Perhaps l can jot down some notes of this matter in future blog.