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Indiana | Do not mean to be argumentative but if it did not in aggregate work that way it would present an arbitrage opportunity that would/does get quickly exploited by large institutional/hedge fund dollars. The problem is it’s very hard to attribute the seemingly random short term movements of individual stocks to a particular reason, but in aggregate, it comes out in the wash so to speak. Other than the tax implications mentioned earlier. I have not seen a study on this, but would assume that in a tax advantaged account it may be possible to receive a small premium over time with the “buy the dividend” strategy by taking advantage of the tax avoidance that large investors cannot. Again I have not read any research to confirm that, but it makes sense that it could be the case. Similar to how retail investors have an edge in using bank cd’s for fixed income vs treasuries as long as the balance is below the fdic threshold. It allows small investors to keep the same full faith and credit of the US govt protection that treasuries give but at a generally higher rate than the same maturity treasury. Sometimes there are advantages to being a smaller investor.
All the best Bonpas, I enjoy your posts!
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3533144
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=924523
On edit: attached a few papers along the line of the discussion
Edited by Slick85 6/18/2020 08:15
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Altria Dividend
