Changing stop loss for dividends

[voigtstr]

BHP. http://www.bhpbilliton.com/bb/investorsMedia/calendar/dividendDates.jsp goes ex-dividend on March 1st.

How do I work out how much BHP is likely to fall by as it ticks over to March 1st (if that's the date that shares are effected) so that I can lower my stop loss amount appropriately?

(or is this one of those "how long is a piece of string" type questions?)

 

[captain black]

BHP dividend is 49.1918c . Ex date is 1st March as you mentioned.

http://www.asx.com.au/asx/research/companyInfo.do?by=asxCode&allinfo=&asxCode=bhp#dividends

 

[voigtstr]

BHP dividend is 49.1918c . Ex date is 1st March as you mentioned.

http://www.asx.com.au/asx/research/companyInfo.do?by=asxCode&allinfo=&asxCode=bhp#dividends

Thanks for that! How much is that likely to reduce the share when it goes ex dividend (if thats how it works) or would that money being paid out, already be factored into the share price? Do I need to adjust my stop loss lower to accomodate dividends? (I think I'm thinking about managed funds how distributions lower the unit price, does the same thing happen to stock prices?)

 

[So_Cynical]

(or is this one of those "how long is a piece of string" type questions?)

I would think so, BHP is about 8% of the ASX200 index and the worlds biggest miner...so there's lots of daily share price influences...going ex dividend is only one of them.

 

[captain black]

Theoretically the price will drop by the dividend amount at the open, but in reality it doesn't always work that way. Look back at some historical prices of BHP on ex div. dates to compare.

Whether you adjust your stop by the dividend amount is a personal decision only you can make as part of your trading plan.

 

[skc]

Thanks for that! How much is that likely to reduce the share when it goes ex dividend (if thats how it works) or would that money being paid out, already be factored into the share price? Do I need to adjust my stop loss lower to accomodate dividends? (I think I'm thinking about managed funds how distributions lower the unit price, does the same thing happen to stock prices?)

All things being equal, on ex-div day the stock falls by the dividend amount. There will always be a slight difference, which is essentially the movement of the stock on the day.

Regarding moving stops, there is not really a hard and fast rule imo. If your stop is below some resistance, it probably makes sense to keep it there despite the dividend drop off. But if your stop is very tight that the dividend drop off will trigger it, and you still want to hold, you might want to move it by the dividend amount to stay in the position.

 

[voigtstr]

Thanks guys! My stop loss is about $2.42 lower than purchase price and was a compromise between the bottom of the trading channel and a money management technique to limit loss to about a tenth of the trade (about 2 percent of the portfolio)

With the information provided by you guys approximately 50 cent drop shouldn't effect me, unless I was already very close to hitting the stop loss anyway..

cheers
the voigtstr