Stocks that pay dividends have expiration dates; referred to as ex-dates. This is the date that the company calculates the dividends for the stock holders. You must be on record of being a stock holder on this date. This means you need to own the stock at least the day before the ex-date. You can own it for weeks or months before the ex-date, but if you sell it before the ex-date, you will not get paid the next dividend. If you buy it on the ex-date, you will not get paid the dividend. Basically you want to own it the day before, and the day after the ex-date, to get paid the dividend.
Don’t jump ahead and say “that sounds like an easy way to make money”. Most, if not all deduct the amount of the dividend from the share price. So the stock price will drop the amount of the dividend and sometimes a little more. If it does go up to more than your purchase price, and you think it’s worth selling, then go for it. However, it is very rare that the stock will go up enough to make it worth selling that soon. Your best course of action is to own the stock for the long haul. You can always set a stop limit to protect against the stock going down more than you care to watch. For most people that do not want to be buying and selling, it’s better to do your research and buy a solid stock, and initially set it to reinvest the dividends.
Now, with that being said, here’s another view of trading. Some dividend paying stocks pay monthly, some quarterly, and some annually. The ones that pay monthly have a good potential to buy and sell. However, this strategy requires you to watch the stock and also be aware of several factors that take a lot of study and knowledge of the stock and the market. For most people you’re better off to buy the stock and hold onto it.
There are a few ways to handle the dividends; one way is to reinvest them, you can have the dividends automatically reinvested thru the company, this saves you a buying fee, however it buys more shares at the current market price. Another way is let the dividend be paid into your account, wait for the stock to go down and then buy more. You will have to calculate the two and see which is best. Another option would be to use the dividends to buy a different stock and diversify your portfolio.
Talk to your tax professional to know what is best for your taxes based on your account in regards to dividends and / or capital gains and reinvesting.