Between ex-div and pay date...

[rogue1]

Is it fair to assume that stock holders will be less inclined to sell (and thus cause a price reduction) between the ex-div date and the payment date..?

 

[Zaxon]

The cum-dividend period and the ex-dividend date are significant. The actual payout date is fairly irrelevant.

If we take your statement that people are less likely to sell, that would actually put upward, not downward pressure on a share's price.

 

[rogue1]

Yes, that was my implication.

Just did some poking around and I think it’s what you are referring to. You actually need to own between cum-div date and record date, and are free to sell after that whilst still receiving the dividend.

Thanks for the reply and confirmation...

 

[Ann]

There is also the 45 day rule

Is it fair to assume that stock holders will be less inclined to sell (and thus cause a price reduction) between the ex-div date and the payment date..?

There is also the 45 day rule

The 45 Day Rule

Franking credits from dividends can reduce or eliminate the tax you have to pay on your investment earnings, including any capital gains you may receive. If you receive any franked dividends on Australian shares, then the 30% prepaid tax on the dividends can be offset against any tax payable. The pre-paid tax is known as franking credits, and they work as a tax credit or offset. All dividend investors and especially shorter term traders should understand the implications of the 45 Day Rule.

 

[rogue1]

I also just re-read my original post and can see how it was stated ambiguously.

What I meant was that selling would reduce the price, but that holders would be less likely to sell and do that...

 

[rogue1]

Does this mean that if you sell before 45 days you aren’t entitled to the franking credits..?

There is also the 45 day rule



There is also the 45 day rule

The 45 Day Rule

Franking credits from dividends can reduce or eliminate the tax you have to pay on your investment earnings, including any capital gains you may receive. If you receive any franked dividends on Australian shares, then the 30% prepaid tax on the dividends can be offset against any tax payable. The pre-paid tax is known as franking credits, and they work as a tax credit or offset. All dividend investors and especially shorter term traders should understand the implications of the 45 Day Rule.

 

[Ann]

There is more, have a bit of a look at the link....

On the 1st of July 2000 the Australian Tax Office (ATO) sought to rectify this anomaly and implemented the 45-day rule. Under this rule, investors must hold the stock “at risk” for at least 45 calendar days, not including the day the stock was acquired or disposed of, in order to qualify for the imputation credits with regards to the franking on the dividends received. So in effect the trader must hold the stock on 47 days, or 46 nights. With regards to preference shares the same rule applies although rather than 45 days the required holding time is 90 days excluding the buy and sell dates.

 

[rogue1]

Cool info!

However, if the dividend has zero franking credits I guess this would be irrelevant, yeah? At the end of the day, it’s just affecting tax refund, not the actual dividend payment...

There is more, have a bit of a look at the link....

On the 1st of July 2000 the Australian Tax Office (ATO) sought to rectify this anomaly and implemented the 45-day rule. Under this rule, investors must hold the stock “at risk” for at least 45 calendar days, not including the day the stock was acquired or disposed of, in order to qualify for the imputation credits with regards to the franking on the dividends received. So in effect the trader must hold the stock on 47 days, or 46 nights. With regards to preference shares the same rule applies although rather than 45 days the required holding time is 90 days excluding the buy and sell dates.

 

[Zaxon]

I also just re-read my original post and can see how it was stated ambiguously.

How people react to dividends depends on what "type" of person they are. Those who are "dividend seekers" would be more likely to hold a share until it went ex-dividend. Those who are "tax reducers" are more likely to sell prior to the ex date, since capital gains, if held 12 months+, are treated more favourably than dividends, which are taxed at your marginal rate.

 

[Ann]

I also just re-read my original post and can see how it was stated ambiguously.

What I meant was that selling would reduce the price, but that holders would be less likely to sell and do that...

Basically traders are aware the stock has gone ex div and they will discount the price accordingly. Sometimes the price lifts pretty quickly afterwards, sometimes it can take ages to recover.

 

[Ann]

Cool info!

However, if the dividend has zero franking credits I guess this would be irrelevant, yeah? At the end of the day, it’s just affecting tax refund, not the actual dividend payment...

Correct. If you are interested in dividend play that link is an excellent site I gave you.

 

[rogue1]

Correct. If you are interested in dividend play that link is an excellent site I gave you.

Dividend play? Sounds kinky...

 

[Ann]

Dividend play? Sounds kinky...

Is the term Dividend Stripping more to your taste!

 

[rogue1]

Is the term Dividend Stripping more to your taste!

Shake your money maker...

 

[Craton]

...and people say that the world of finance isn't sexy.