This article originally appeared on RealMoney.com on Sept. 3, 2014 at 1:00 p.m. To read more content like this AND see inside Jim Cramer's multi-million dollar portfolio for FREE... Click Here NOW.
We often flag a "Dividend D-Day," when there is a huge flow of dividend income in a short period, but at the moment, September is looking more consistent than usual. The second month of the quarter is always the most flush with income, with month No. 3 a fast follower. At this point, however, we have a bit slimmer pickings than usual -- in part, because many of the yields have shrunk to unattractive levels due to the pleasant summer rally.
This morning I took a different cut, sorting by the biggest upcoming dividends in the next two weeks, rather than simply looking at the sequence by date. Looking farther out, you can plan your cash flows to trade in the best upcoming dividends. I often buy one to two weeks ahead. Although you risk more if a downside trend develops, you also have the chance to book some capital gains during a rally.
While capital gains are not the objective, a little extra is never unwelcome.
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The table below shows the fattest dividends set to pay (i.e., go ex-dividend) in the next two weeks.
The standouts are highlighted, and the most important are Altria (MO) and Reynolds American (RAI) , stalwarts in the tobacco group. (Philip Morris International (PM) will soon be on their heels, but it has not declared yet.) I have been rotating consistently through the tobacco stocks quarter in and quarter out for five years, rarely booking a bad trade. To be honest, I cannot really tell you why they trade so well -- they are owned for income and should be more efficient around the dividend, but they are not. Rather than question my experience in the group, however, I will just utilize it until they change.
To give you a flavor for how well tobaccos work in dividend capture, consider these statistics. Over the past 20 quarters (five years), I have executed 65 dividend capture trades in the big four tobacco names:
- Lorillard (LO) ;
- Reynolds American; and
- Philip Morris.
Only seven of those trades resulted in a negative total return. That is an average success rate of 89%!
The other attractive upcoming trades are also consumer-related and are highlighted. Additionally, I find that Williams Companies (WMB) trades pretty efficiently. And Merck (MRK) is usually as good as the tobaccos, so it's worthy of playing. I avoid the old-line telcos such as Frontier Communications (FTR) , because they are too stable and very hard to sell. I have similar experiences with REITs, many financials and the occasional oddball such as Linn Energy (LINE) , which has always given me trouble.
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