ABSTRACT One of the puzzles to have emerged from the Kepler and TESS missions is the existence of unexplained dips in the light curves of a small fraction of rapidly rotating M dwarfs in young open clusters and star-forming regions. We present a theoretical investigation of one possible explanation – that these are caused by dust clouds trapped in the stellar magnetic fields. The depth and duration of the observed dips allow us to estimate directly the linear extent of the dust clouds and their distances from the rotation axis. The dips are found to be between 0.4 and 4.8 per cent. We find that their distance is close to the co-rotation radius: the typical location for stable points where charged particles can be trapped in a stellar magnetosphere. We estimate the charge acquired by a dust particle due to collisions with the coronal gas and hence determine the maximum grain size that can be magnetically supported, the stopping distance due to gas drag, and the time-scale on which dust particles can diffuse out of a stable point. Using the observationally derived magnetic field of the active M dwarf V374 Peg, we model the distribution of these dust clouds and produce synthetic light curves. We find that for 1μm dust grains, the light curves have dips of 1–3 per cent and can support masses of order of 1012 kg. We conclude that magnetically trapped dust clouds (potentially from residual disc accretion or tidally disrupted planetesimal or cometary bodies) are capable of explaining the periodic dips in the Kepler and TESS data.