It’s no secret that dividends are a great way to boost your overall income. The only problem is that those quarterly payouts can lead to droughts in monthly income. For investors, one of the best ways to find income throughout the year is to use what’s called a dividend capture strategy.
In a dividend capture strategy, investors buy a stock just before its critical ex-dividend date, hold it long enough to “earn” the dividend, and then sell shares on the ex-dividend date or at some point afterward. The idea is to stick around long enough to capture the dividend and while the stock recovers after its share price drop. On the ex-dividend date, a stock will see its share price reduced by the amount of the dividend as investors account for the loss of cash on the firm’s balance sheet and readjust its valuation.
All in all, a dividend capture strategy can be a lucrative way for investors to generate income throughout the year. And our DARS model can help you find the best stocks to use for such a strategy. With that in mind, here are the best dividend capture stocks for June.
Learn more about dividend capture strategy here.
Using Our DARS Model for Dividend Capture
Dividend.com’s proprietary Dividend Advantage Rating System (DARS) uses a sophisticated algorithm to rate each of the nearly 7,000 stocks on our site. The model looks at five metrics – relative strength, yield attractiveness, dividend reliability, dividend uptrend and earnings growth – for each security and then compiles its final DARS ratings based on the individual scores of these metrics. While the model is generally used for longer-term dividend success, it can play a major part in shorter-term dividend capture strategies.
Obviously, a strong dividend yield is what dividend capture is all about, and that’s what yield attractiveness looks at. The slightly higher yield of market averages that DARS prefers is a great starting point to capturing more income via the shorter-term strategy. Likewise, dividend reliability – which looks at a stock’s payout ratio – helps ensure that those dividends will actually be paid. While announcing a dividend is almost a guarantee that it will be paid out that quarter, things can still happen. Stocks with lower payout ratios ensure that a firm still has plenty of ability to make good on its promise to pay. That’s essential for a dividend capture strategy, and a stock’s dividend reliability score helps investors pick the best candidates.
Earnings growth and dividend uptrend play a critical part in the next piece of dividend capture, and that’s price recovery after the ex-dividend date. Stocks with continued strong earnings growth are often in high demand and see their share prices recover swiftly after the ex-dividend date. Dividend uptrend looks at a stock’s price-to-earnings (P/E) ratio. DARS favors those stocks with P/Es slightly less than market averages. This means that investors are evaluating a security on its growth and income prospects. This combination drives returns and, ultimately, how quickly a stock recovers from its ex-dividend losses.
Check out here to learn more about the ex-dividend date.
Also driving this is a stock’s momentum, as measured by relative strength. If a stock has continued forward momentum and investors are still in love with its story, earnings, growth, etc., then it should be able to recover very quickly after its dividend price adjustment.
All of this boils down to a stock’s price recovery strength, which is basically the number of days it takes for a stock to recover after its fall on the ex-dividend date. In most cases, top-ranked DARS stocks fully recover within a day or so. And in many cases, they might recover on the ex-dividend day itself.
Keeping the price recovery trend in mind, we have compiled a list of prominent stocks that went ex-dividend last month.
| Ticker | Name | Ex-Dividend Date | Dividend Paid | Days to Recover Price in the Past * |
|---|---|---|---|---|
| (UNP ) | Union Pacific | 05/26/2017 | $0.61 | 0 |
| (IDA ) | IDACORP | 05/03/2017 | $0.55 | 1 |
| (KHC ) | Kraft Heinz | 05/17/2017 | $0.60 | 1 |
| (UTX ) | United Technologies | 05/17/2017 | $0.66 | 2 |
| (MMM ) | 3M | 05/17/2017 | $1.18 | 2 |
| (JNJ ) | Johnson & Johnson | 05/25/2017 | $0.84 | 2 |
| (TGT ) | Target | 05/15/2017 | $0.60 | 2 |
| (HON ) | Honeywell | 05/17/2017 | $0.67 | 3 |
| (BOH ) | Bank of Hawaii | 05/26/2017 | $0.50 | 3 |
| (PEP ) | PepsiCo | 05/31/2017 | $0.81 | 3 |
| (GWW ) | W.W. Grainger | 05/04/2017 | $1.28 | 3 |
| (UPS ) | United Parcel Service | 05/11/2017 | $0.83 | 4 |
| (SJW) | SJW Corp | 05/04/2017 | $0.22 | 5 |
| (ETN) | Eaton | 05/03/2017 | $0.60 | 5 |
| (K ) | Kellogg Co. | 05/30/2017 | $0.52 | 5 |
*To calculate the days to recover, we looked at historical price data on the ex-dividend dates for each of the stocks in the table over the last 2 to 3 dividend payout cycles. That number was averaged. Outliers and major market events were not considered. While the average days to recover can be a good guide, it’s not set in stone and, depending on market conditions and underlying stock performance, the time it takes to recover from an ex-dividend date could be significantly different for future dividend payouts.
The Top Dividend Capture Stocks for June
With that in mind, here are some of the top dividend capture candidates for June when looking at our DARS model. Check out our complete list of Best Dividend Stocks ranked according to their DARS rating.
The following stocks have been picked by looking at the entire universe of stocks going ex-dividend in June. They are sorted by the highest-rated DARS stocks going ex-dividend in the month.
| Ticker | Company Name | Buy Date | Ex-Dividend Date | Dividend Amount |
|---|---|---|---|---|
| (MSI ) | Motorola Solutions Inc. | 6/12/2017 | 6/13/2017 | $0.47 |
| (POR ) | Portland General Electric | 6/21/2017 | 6/22/2017 | $0.34 |
| (UGI ) | UGI Corp | 6/12/2017 | 6/13/2017 | $0.25 |
| Liquid error: internal | Raytheon Co. | 6/29/2017 | 6/30/2017 | $0.80 |
| (OMC ) | Omnicom Group | 06/09/2017 | 6/12/2017 | $0.55 |
| (EIX ) | Edison International | 6/27/2017 | 6/28/2017 | $0.54 |
| (APD ) | Air Products & Chemicals | 6/28/2017 | 6/29/2017 | $0.95 |
| (DLR ) | Digital Realty Trust | 6/12/2017 | 6/13/2017 | $0.93 |
| (MO ) | Altria Group | 6/12/2017 | 6/13/2017 | $0.61 |
| (GILD ) | Gilead Sciences | 6/13/2017 | 6/14/2017 | $0.52 |
| (WM ) | Waste Management | 06/06/2017 | 06/07/2017 | $0.43 |
| (NDAQ ) | NASDAQ OMX Group | 6/13/2014 | 6/14/2017 | $0.38 |
| (DNKN ) | Dunkin Brands | 5/31/2017 | 6/1/2017 | $0.32 |
| (TMO ) | Thermo Fisher Scientific Inc. | 6/12/2017 | 6/13/2017 | $0.15 |
| (YORW ) | York Water | 6/27/2017 | 6/28/2017 | $0.16 |
Use the Ex-Dividend Calendar to find stocks going ex-dividend. You can also check our Stock Screener to find stocks with high DARS ratings to implement your dividend capture strategy.
The Bottom Line
A dividend capture strategy allows investors to get a full year’s worth of income by buying stocks at just the right time to collect their payouts. While our DARS system is typically used for longer holding periods, the model provides plenty of information on a stock’s price recovery potential after its ex-dividend date.
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