Don’t “buy a dividend”
Thinking about purchasing a stock or mutual fund just to get the dividend? Before you do, consider these points:
- Dividends are announced several days or weeks before they’re paid. It could seem like a good idea to buy shares of a stock or fund just in time to get the dividend payment—but in many cases, it’s not.
- If you’re investing through a tax-deferred account, dividends won’t impact your tax situation. But if you’re investing through a taxable account, these dividend payments will lead to additional taxes for you.
- When a fund pays a dividend, its share price may drop that day, even if the broader market rises.
Notes: All investing is subject to risk, including possible loss of principal.