Dividend question

[mime]

Hello

Can someone please tell me how Dividends work? Do you have to own the stock for a certain number of time? I recently bought NAB and they pay a nice Dividend buy I'm not sure if I'll get it or not.

Thanks guys.

 

[ghotib]

mime,

Dividends are paid to whoever holds shares at 5pm on the dividend "Record Date" included in the company's announcement.

You can find a lot of free information about how shares, dividends, and the stock market work on the ASX website, among many others.

Ghoti

 

[mime]

Wait. What's stopping you from jumping from major bank to major bank collecting multiple dividends every year?

 

[markrmau]

To get dividend, you must buy before the ex-div date (meaning without dividend). As I understand it, this is a few days or so before the record date (at which time the share registry is given the list of people who had the stock when cum-div (with dividend)). Someone please correct this if wrong.

Obviously the stockmarket knows this and the price will drop by the total cost of dividend (div+franking credits) when the stock goes ex-div. look at PBL this week.

I would be wary at chasing stocks purely because of high dividend yeild. High yield can be because of undervalued stock (arguably the case for NAB) or because the company has poor growth potential or systemic problems (arguably the case for NAB). Also, last week you may have considered buying ION for it's yield, but look what happened.

 

[jkool]

mime: well nothing is stopping you to do just that if you think its (Dividend Trading) strategy for you. Some people even borrow (eg. using installments) against an upcoming dividend - a leverage as any other increasing your potential profit as well as your loss should the market go against you.

At the end you will find out that dividend trading is certainly pretty risky strategy as pointed out in markrmau post.

 

[ghotib]

From the ASX website glossary:

ex date
The date on which shares change from being quoted "cum" to "ex". It is usually the fourth business day prior to the record date.

ex dividend date
Shares are quoted ‘ex dividend’ four business days before the company's Record Date. To be entitled to a dividend a shareholder must have purchased shares before the ex dividend date. The share price may fall on the ex dividend date, with the fall in price being related to the amount of dividend being paid, on the basis that the buyer will not, in the ordinary course of events, receive the dividend because they will not be registered by the Record Date.

ex-dividend
Shares sold ex-dividend entitle the seller to retain the current dividend. Shares are usually quoted ex-dividend four business days before company’s book close

record date
5.00 pm (in the case of a proper SCH transfer, a later time permitted by the SCH Business Rules) on the date specified by the issuer as the date by which the issuer will identify the persons on the company's register entitled to the benefit of a Corporate Action.

share registry
An organisation which, on behalf of a company, records changes in share ownership, issues share holding statements, and makes adjustments for dividend payments, bonus and rights issues.


Several hundred other terms are defined there as well. The definitions aren't always clear and sometimes they're not quite consistent, but it's a good place to learn for yourself.

Ghoti

 

[mime]

Do you guys consider ION a good buy?

It has a low P/E ratio.

 

[ghotib]

Mime,

This sounds like you're asking for investment advice. You're not likely to get that on a forum and you shouldn't necessarily trust it if you do. You'll get better responses, and you'll learn more, by working out your own opinion and then asking people what they think of your reasons. Reading a bit about the recent history of the company and/or the stock will probably help too.

Ghoti

 

[Bingo]

Do you guys consider ION a good buy?

It has a low P/E ratio.

Quote from JP Morgan below. The low PE relates to the higher perceived risk.


"ION
Broker: JPMorgan
Rating: Unchanged at neutral but under review


Comment: "Ion management now expects profit in the first half of 2005 to be significantly lower than the first half of 2004. We are forecasting a $22.6 million net profit in the first half of 2005, which represents a 23 per cent reduction on reported net profit for the first half of 2004.

"Most of the company's developments are running on time but a key issue appears to be the profitability of new developments during the ramp-up stage, specifically at the Wingfield plant in South Australia.

"The company is looking to sell a number of its assets to raise funds for its developments and to improve the balance sheet. Given the capital constraint, if Ion is unsuccessful in disposing of some assets, it will look to place additional equity to cover the $15 million payment of final dividends on October 12.

"We are reviewing our earnings forecasts. However, we note the risk to our forecast net profit for the first half of 2005 and full-year 2005 is on the downside."

 

[Bingo]

Do you guys consider ION a good buy?

It has a low P/E ratio.

Another broker rating. These were bothy released to-day.

Broker: UBS
Rating: Unchanged at neutral 2
Price: Decreases to $1.35 from $1.80

Comment: "We have cut our 2005 forecast net profit from $57.9 million to $43.6 million and 2006 forecast from $59.1 million to $49.9 million. At this stage, we have reduced confidence in our earnings forecasts as we believe earnings visibility is very low. We see potential for further cost overruns and/or delays relating to new plants and contracts. In addition, a question mark remains over Ion's ability to secure new transmission contracts."

 

[mime]

I wouldn't buy a stock from advise off anyone. I learnt that from previously getting poor advise off my mum. I was just wondering if you guys would have considered it a good buy because of it's low PE ratio however someone quoted

"Quote from JP Morgan below. The low PE relates to the higher perceived risk."

What that means I don't know but I thought that if it has a low PE ratio it is under-valued. I am a bit of a trading novice.

 

[markrmau]

If you are new to this, I would try to read as much as possible before you start gambling. The ASX website has some links to the making money website (fairfax I think) which has some book titles. Another book you may want to read is "A Random Walk Down Wall Street".

 

[mime]

I'm not that new. I've been trading since Telstra floated.

 

[mime]

Hey is the whats the difference between the Ex-dividend and the record date?

 

[Mofra]

There's a difference in dates because trades generally take three working days after execution until they are settled - so the ex-dividend date is the the first day buyers would not be entitled to the dividend, the record date is when the company finalises its dividend distribution according to the share registry itself (you will be recorded on the registry upon settlement of a purchase)

 

[crashy]

and its P/E now is?

rofl

 

[Dwib]

Trust you crashy to stick the boot in

I found it to be an interesting thread. I don't know the full story of ION but to see the broker recommendations back in Sept and Oct. And now to have it go into administration.

 

[rozella]

Hey is the whats the difference between the Ex-dividend and the record date?

The exdiv date is 4 settlement days prior to the record date.

rozella

 

[Ken]

zfx went ex div and the share price has risen.

im not a chartist but i have not seen that a lot.

majority of companies do fall back after div ex div date.

MFS were trading at 4.10 when it went ex div, next day it close around 3.90. the dividend was 20 cents....

if your buying short term, share price is more important. if you are going long term, dividends can be just as beneficial with a gradual share price rise creating what i call the trump towers effect.

its income....

 

[Fab]

Instalment warrant are good tools to play dividend yield. I guess it depends what is your tolerance to risk as they will also leverage your investment both way