No. of Recommendations: 17
EMFreak -- Dividends are like sex in marriage without the possibility of pre-marital sex or extra-marital sex and with a spouse who always schedules sex in advance. When you marry a stock, you get none of the dividends (sex) promised or delivered before the marriage and regular dividends (sex) after marriage unless and until the company (spouse) suspends dividend payments (sex) or dies or you sell (divorce) it.

The ex-dividend date is like a promise to have sex on a particular future date. If you marry a stock between the time it has promised to have sex, er, pay a dividend, and when it actually does, then it's going to have its first intercourse with its old spouse not with you. After that little encore with the old spouse, you get the rest. Perhaps you've heard of this happening as an exception in the matrimonial realm. With stocks bought (married) between the ex dividend date (sex promised date) and the dividend payment date (actual tryst date) it is the norm. Stocks are sluts in that way, but paradoxically it's an act of loyalty, keeping a promise made even though circumstances have changed.

Now, you might think a good way to have lots of sex, er, get lots of dividends, would be to buy stocks just before the ex-dividend date and sell them right after. But this is like paying for sex. Stocks gradually get more and more excited as the ex-dividend date approaches and this can be seen in a tendency for their price to rise. Then, right after the ex-dividend date passes, there is a sharp drop-off in that excitement which is totally inconsistent with the sex metaphor and I can't think of a way to tie it in. Wait -- It's like the spouse's orgasm happens prematurely, when the promise to have sex in the future has been issued, rather than when the event actually occurs.

Many other factors also excite and unexcite stock prices (insert metaphor extension here) so this tends to mask the influence of the approach and passing of the ex-dividend date, with the result that it may be difficult to verify what I am saying in specific instances. But over many stocks and many ex-dividend dates, the effect on stock prices of the approach and passing of the ex-dividend date is strong and consistent. So, as with patronizing prostitutes, you can have lots of dividend income (sex) by paying for it but it's not going to be satisfying (I imagine, not having myself used the strategy in either realm).

Hope this helps.

Simile Jim
Print the post  


When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.