You may wonder if there is a way to capture only the dividend payment by purchasing the stock just prior to the ex-dividend date and selling on the ex-dividend date. That's not entirely correct.

Remember that the stock price adjusts for the dividend payment. Suppose that you buy 200 shares of stock at $24 per share on February 6, one day before the ex-dividend date of February 7, and you sell the stock at the close of February 7. The stock pays a quarterly dividend of $0.50 per share. The stock price will adjust downward on February 7 to reflect the $0.50 payment. It's possible that, despite this adjustment, the stock could actually close on February 7 at a higher level. It is also possible that the stock price could close February 7 at a level lower than the $23.50 price suggested by the $0.50 adjustment to reflect the $0.50 dividend.

For the sake of this example, assume the stock adjusts perfectly and you sell at $23.50 per share. Are you better or worse off for capturing the dividend? You will receive $0.50 per share in the dividend, but you’ll lose $0.50 per share because of the decline in the stock price. It would appear to be a wash. But what about taxes? In order to receive the preferred 15% tax rate on dividends, you must hold the stock for a minimum number of days. That minimum period is 61 days within the 121-day period surrounding the ex-dividend date. The 121-day period begins 60 days before the ex-dividend date. When counting the number of days, the day that the stock is disposed is counted, but not the day the stock is acquired.

If the stock is not held at least 61 days in the 121-day period surrounding the ex-dividend date, the dividend does not receive the favorable 15% rate and is taxed at your ordinary tax rate.

To recap your dividend capture strategy:

In this case, the dividend-capture strategy was not a winner. You're out the commissions to buy and sell the shares, you have a realized loss that you may or may not be able to write off immediately (depending on the amount of realized gains and losses you already have), and you lose the preferred 15% tax rate on your dividends because you didn't hold the stock long enough.