Dividend stripping

In dividend stripping, a shareholder sells a stock just before the dividend payment is to be made and buys it back at a lower price after the dividend has been deducted. Dividend stripping is advantageous in particular for stockholders whose price gains are either not taxed at all, or taxed at a low rate, such as foreign investors with limited tax liability, or shareholders who realise long-term gains by holding their stock for longer than one year (in Germany, price gains are tax-free if the stock was held longer than twelve months).