With both companies trading a relatively cheap valuations -- an average price to earnings of 14, compared to the S&P 500's (SPX), P/E of 21, there's an opportunity for investors to lessen the risk often associated with the strategy known as "buying dividends."
Under this strategy an investor buys stocks for the sole purpose of collecting the announced quarterly dividend and then sells the stock within days after the dividend cash payment has been paid the company. It's important to note, however, that the dividend payment may take weeks to reach your brokerage account, depending on the company's pay schedule.
Still, whether in bear or bull markets, dividend capture can be a lucrative strategy. To be successful requires pinpoint timing.
When selecting the companies to buy, the first important information to know is the ex-dividend date, which is the last day an investor must own a position in said company to qualify for a dividend payment. To that end, lets take a look at the merits both companies, starting with Dow Chemical.
With its shares up more than 16% on the year, Dow Chemical has been a pleasant surprise. Dow, which prides itself on being shareholder-friendly, has become the gift that keeps on giving. The Michigan-based industrial conglomerate, which pays a 42-cent quarterly dividend yielding 3.20% annually, has raised its total payout by 180% just in the past four years.