A client recently asked us if Stockspot would consider adding a pure income producing ETF to our portfolios to take advantage of ‘dividend harvesting’. We thought it was a great question so decided to share the answer with everyone!
Dividend harvesting is a strategy that involves buying shares just before they pay dividends and selling them just after dividends have been paid. At face value this sounds like a very sensible way to collect dividends without having to hang onto shares for too long.
However, like any investment strategy that involves timing your entry and exit points, dividend harvesting has risks. The biggest risk with dividend harvesting is shares tend to fall in price on the day they pay their dividend. Therefore any amount you gain in the dividend is likely to be lost on capital returns.