Can I make money moving 401k funds to company stock to get dividend benefits?

My company recently announced a dividend, what if I put all of my 401 money into my company stock shortly before dividend deadline date then wait about a month until payable date. After dividend has been paid then re-allocated it back to my diversified investments so I can cash in on the dividend.

Obviously there is a risk that the stock goes down during that time which might offset the dividend.
1. Is this allowed ?
2. Do people/inventors do this routinely?
3. Historically what is the outcome of such a gamble?
4. What typically happens to stock prices around the time of dividend payout?

(In addtion to initial post. All of this is done within my 401k plan. My company plan allows us to move assets around into company stock and other mutual/investment funds.)

My company recently announced a dividend, what if I put all of my 401 money into my company stock shortly before dividend deadline date then wait about a month until payable date. After dividend has been paid then re-allocated it back to my diversified investments so I can cash in on the dividend.

Obviously there is a risk that the stock goes down during that time which might offset the dividend.
1. Is this allowed ?
2. Do people/inventors do this routinely?
3. Historically what is the outcome of such a gamble?
4. What typically happens to stock prices around the time of dividend payout?

I'm assuming you mean that company stock is one of the options in the 401K plan. In that case, you'd have to check with your 401K administrator to see what the rules are for dividend distributions. In any case, you can't buy a stock the day before a dividend is declared, and expect any kind of dividend. The dividend is a reward to those that have held the stock over time. You would make very little this way, and you would be taking a high risk. In any case, your plan most likely will not allow this level of trading.

No. You cannot do this. The penalty you pay on our 401k would kill any gains you make in the stock. Also, the dividend probably already rose the stock price, so when you sell the stock, it may come down a little. If you want, you can use other money to buy the stock, but as an employee (insider), you have to wait a certain amount of time to sell any company stock or it looks like insider trading.

Not all companies allowed this but when you access your account to allocate your investments and you can see the stock as one of the choices then your company allows it. Check with your compay's benefit department.

This is a good idea though if you know what you're doing and if you know your company too well. Good luck!

Stock prices drop by the same amount as their dividend payment the day after it is paid. This is done intentionally to prevent schemes like the one you suggest. Your strategy will result in a zero-sum gross gain.

However, after you factor in the hidden transaction costs from selling your mutual fund shares and then buying them back, as well as the transaction costs of buying and selling your company's stock, you will then be in the minus. And, if the company's shares lose value in the mean time, you lose even more. Congrads, you just made the brokers very rich while you got poorer.

When it comes to retirement investing, you need to think long term. This sort of quick turnaround tactic will only get you in trouble and distract you from your long-term goals. Costs are a vital factor in determining your overall wealth.

Consider this exerpt from chapter 19 of my free book (downloadable at http://www.invest-for-retirement.com)

Let's follow the results of three different large-cap stock funds over a period of 40 years. I will assume that each fund earns a gross return - the return of the stocks themselves - of 8% each year, on average. As our discussion in previous chapters has shown, over long periods of time the gross returns on funds of the same type tend to be very similar because the market is efficient. Fund A has a 2% expense ratio, Fund B has a 1.3% expense ratio, and Fund C has a 0.1% expense ratio. For simplicity, we will not factor in loads, taxes, or indirect costs. Therefore, the net return to the investor would be the gross return minus the expenses. For Fund A, the net return would be 8 minus 2, or 6%. For Fund B, the net return would be 8 minus 1.3, or 6.7%. For Fund C, the net return would be 8 minus 0.1, or 7.9%.

The following chart shows the account balance of each fund over a period of 40 years. In this example we start with a $10,000 lump-sum investment and make no further contributions. The dividends and capital gains are reinvested, so the return is compounded. Here are the results.

Fund Final Value at 40 Years
A $102,857
B $133,837
C $209,343

Notice the low-cost fund wound up with twice the final value as the high-cost fund. Small differences in costs compound to very large differences in final wealth. I can demonstrate examples of how for every 0.5% increase in annual expenses, you will fall short by $100,000 or more over a period of 30+ years. And, for people maxing out their 401(k) plans, over a period of 40 years, for every 0.5% increase in annual expenses, you will fall short by a quarter of a million dollars.