Dividend stripping is the purchase of shares just before a dividend is paid, and the sale of those shares after that payment, ie. when they go ex-dividend.

This may be done either by an ordinary investor as an investment strategy, or by a company's owners or associates as a tax avoidance strategy.

Investors

For an investor dividend stripping provides dividend income, and a capital loss when the shares fall in value (in normal circumstances) on going ex-dividend. This may be profitable if the income is greater than the loss, or if the tax treatment of the two gives an advantage.

Different tax circumstances of different investors is a factor. A tax advantage available to everyone would be expected to show up in the ex-dividend price fall. But an advantage available only to a limited set of investors might not.

In any case the amount of profit on such a transaction is usually small, meaning that it may not be worthwhile after brokerage fees, the risk of holding shares overnight, the market spread, or possible slippage if the market lacks liquidity.