When Can I Sell A Stock After Ex-Dividend Date How to Pick Dividend Stocks Amongst Penny Stocks Carefully For Maximum Profits and Without Loss

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How to Pick Dividend Stocks Amongst Penny Stocks Carefully For Maximum Profits and Without Loss

Stocks of those companies that offer dividends regularly is one of the several important factors that you need to take into account when deciding to pick stocks for investment and trading purpose.

For those who might not be aware of, dividends are portions of that profits earned by the company in a financial year and which the management of that public company, declares and distributes to all their shareholders in proportion to the number of shares they each hold.

The dividend so declared is usually a percentage of the actual face value of the share and not on the value at which you made your purchases, be it at a premium or current market rate at which they were actually bought for.

In terms of revenue earned by the shareholder the dividend offered may not appear temptingly high in terms of actual percentage of the value at which you may have perhaps brought them for from the market i.e. at the price quoted on the stock exchange where the company is officially listed for trading.

Nevertheless those companies that offer dividends speaks volume about their financial health, which is an important factor that you must look deeper into, to decide if its worth investing in such a company or not.

Now, don’t you jump to conclusion too soon as soon as a company declares dividend to all its shareholders. There are several other factors that needs to be examined carefully to judge if the company is actually in a position to pay the same at all.

Its very important to find out whether or not the said company has enough financial stability and funds in its reserve to sustain payment of dividends to all its shareholders. Also one needs to know whether or not the option for reinvesting the profits earned for overall future growth and prosperity of the company than distributing the same as dividends.

Its not obligatory for a company to offer dividends each year to its shareholders, but there are times when the revenue earned crosses the company expectations for that year and the surplus profit so earned is distributed to the shareholders in gratitude for their sustained support.

It so happens that as soon as the management of a company declares at a shareholders meeting to distribute dividends at a pre-decided percentage, there is often a sudden surge in the value of the stocks of that company. Dividends are one important way to generate shareholders confidence in that company and thereby boost demand for its shares which in turn raises the price of the share so quoted.

Its here that I want to warn you. Just because the management of a company had declared dividend and by reflex action traders rush in to corner those shares with the hope that there would be further escalation in its value.

This is particularly true for penny stocks, where the management decides to announce the voting for the distribution of dividend through press release, but in reality they never try to file it officially with NASDAQ for failing to get a positive vote in response. This happens because in most cases 51% of the shares for that company is held by the management itself. So as traders rush to buy many of the shares hoping to convert it to a yes response the prices appreciate for the share, but the effort turns out to be in vain as more likely than not they lose to the management at the time of actual voting.

As a result the management is not under any obligation to pay the dividends so announced since it never filed the same officially, on the contrary it gets free publicity and investors on impulse rush to buy the shares hoping to cash on future demand when the value climbs several times over.

This is a perfect example of the illegal pump and dump schemes when prices of the penny stocks climb because of an announcement for distributing dividends and when the price reaches a predetermined value, the management and brokers dump the shares to book profit, without keeping up to its promise to pay dividend.

Lets suppose the management does keep up to its words by actually going through the tedious process of distributing dividends to all those stockholders who actually hold the shares of that company on or before the ex-dividend date fixed by the stock exchange after the company files for distributing of dividends so announced. However if you sell the stock or purchase on the ex date you as an investor cannot receive any dividend on the stock.

Now as an investor as I have already mentioned earlier in the article you have to test the financial strength of the company to find out if it at all can survive in the market after distribution of dividends.

That is why you have to be very cautious when a penny stock company announces distribution of dividend.

Since its very difficult to find amongst thousands of penny stocks which one of them would really do well and multiply its value in coming days you would require a software that would ease much of your burden to monitor the current hot penny stock picks and put it on your watch list to observe its trading pattern.

There is one such software developed by a college dropout mathematical genius that can actually help you to analyse various penny stocks and guide you in which of these penny stocks would you actually stake your money to build a profitable portfolio that would provide you with maximum gains with least possible risk, even when the markets are far too volatile for you to keep course.

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