Dividend stripping

Dividend stripping is the purchase of shares just before a dividend is paid, and the sale of those shares after that payment, i.e. when they go ex-dividend. On the day the company trades ex-dividend, theoretically the share price drops by the amount of the dividend. However, quality companies, such as the Australian banking sector, historically recover the value of the dividend within a matter of weeks, at which time they can be sold at a potential profit.