Quick answer: Dividend capture math is comparing what you earn (the dividend) against what you lose (price drop + costs + taxes) and what you regain (price rebound). If rebound + dividend beats drop + costs, the trade works.

Dividend capture isn’t free money (so let’s do the real math)

Here’s the truth that saves you months of frustration:

• The dividend is real cash.
• The price reaction around ex-div is also real.
• Your costs (spread, slippage, taxes) are brutally real.

So the goal is not “collect a dividend.” The goal is:

Collect a dividend in a situation where the price drop is manageable and recovery is likely.

The simplest dividend capture equation

Use this as your mental calculator:

It’s not perfect (markets aren’t polite), but it’s the right framework.

Define the pieces (plain English)

• Dividend: the cash paid per share.
• Price Drop: how much price falls around ex-div (often roughly dividend-sized, sometimes more, sometimes less).
• Trading Costs: commissions (if any), plus spread/slippage (almost always).
• Taxes: depends on your situation and holding period. Short holds can reduce tax advantages.
• Price Rebound: how much price recovers after ex-div during your holding window.

A quick example (with friendly numbers)

Let’s say:

• You buy at $50.00
• Dividend is $0.50
• Price drops to $49.60 around ex-div (a $0.40 drop)
• Your spread/slippage round-trip is $0.05 total
• You sell at $49.90 (a $0.30 rebound from $49.60)

Estimate:

• Dividend: +$0.50
• Drop: −$0.40
• Costs: −$0.05
• Rebound: +$0.30

Result (before taxes) ≈ $0.50 − $0.40 − $0.05 + $0.30 = +$0.35 per share

That’s the basic game.

Breakeven: the one number you should care about

Breakeven asks: “How much rebound do I need so this trade doesn’t stink?”

If the dividend is small and the spread is large, breakeven can get ugly fast.

Why spreads matter more than people think

If your dividend is $0.20 and your round-trip spread/slippage is $0.08, you just gave away 40% of the dividend before the trade even has a personality.

This is why Yield Raiders often prefer:

• Liquid tickers (tighter spreads)
• Clean execution (less slippage)
• A planned entry (not chasing)

How to score a setup in 60 seconds

Before you trade, ask:

• Dividend size: meaningful enough to matter?
• Typical ex-div drop: historically smaller than the dividend, roughly equal, or worse?
• Recovery speed: does it tend to bounce in your holding window?
• Costs: will spreads/fees eat the edge?
• Landmines: earnings/news nearby?

FAQ

Should I only trade stocks that drop less than the dividend?

Not necessarily. Some trades work because rebound is fast. The key is that your expected rebound + dividend beats the drop + costs.

Do ETFs behave differently than individual stocks?

Often they can be less volatile, but results vary. The math framework stays the same.

What’s the biggest beginner math mistake?

Ignoring spread/slippage and pretending the dividend is pure profit.

Next step

If you want the “math + rules” version — the part that keeps a good-looking setup from turning into a slow leak — the book lays out the guardrails and the repeatable decision process.

Get the book on Amazon

Related: What is dividend capture? | Dividend capture calendar

Related:

• Dividend Capture Checklist
• What is dividend capture? (start here)
• Dividend capture calendar
• Dividend capture math
• Dividend capture taxes
• Best brokers for dividend capture