Dividend Stripping
Dividend stripping is a strategy where an investor buys a company’s stock just before the ex-dividend date to receive the dividend, then sells the stock after its price drops. The capital loss from selling the stock at a lower price is typically offset by the dividend income. When the dividend income was tax-free this was beneficial startegy, making it attractive to investors. However, in India, dividends are now subject to tax, reducing the effectiveness of dividend stripping as a profitable strategy. Investors must consider the tax implications when using this approach in their investment decisions.
Related Terms
Bull Market
A bull market describes a sustained upward trend in the stock market. It signals optimism...
Listing
Listing is the process where a private company makes its shares available for public trading...
Basing
Basing occurs when a security’s price moves sideways after an extended decline, forming a “base”...
Diversification
Diversification is an investment strategy that spreads risk by allocating funds across various asset classes,...
Holding Period
The holding period of a financial security refers to the duration between the time an...
Convertible Arbitrage
Convertible arbitrage is a trading strategy where investors buy convertible securities (like bonds or preferred...
