Dividend, Share Price: Is there a connection?

[rozella]

Re: Dividend, Share Price. Is there a connection?

Re-entered SGP today @ 875.0 with a margin of 80%
Investment 175.0/unit
Distribution announcement expected 21st June
Exdist expected 25th June
Last years dist was 20.9/unit 19.65% franked 1.87/unit

 

[rozella]

Re: Dividend, Share Price. Is there a connection?

Bought DRT today @ 182.5 with a margin of 75%
Investment 45.625/share
Announcement expected around 20th June
Exdistribution expected 25th June
Last years distribution was 5.55/unit

 

[rozella]

Re: Dividend, Share Price. Is there a connection?

Sold DRT today @ 194.0
Bought 24th May @ 182.5 with a margin of 75%
Investment 45.625/unit
Announcement expected around 20th June
Exdistribution expected 25th June
Last years distribution was 5.55/unit
Gross profit 11.5/unit = 25.21% return on investment.

I will be looking for another re-entry on a low day

 

[j4mesa]

Re: Dividend, Share Price. Is there a connection?

Hi Don,

how was ur div trading going so far....

Has not gone into div trade for quite awhile.
Will now be looking into...

Missed LNN yesterday at its low......
no more caps

 

[rozella]

Re: Dividend, Share Price. Is there a connection?

Hi Don,

how was ur div trading going so far....

Has not gone into div trade for quite awhile.
Will now be looking into...

Missed LNN yesterday at its low......
no more caps

G'day j4mesa,

I don't quite understand all your shorthand jargon, but yes, my dividend trading is travelling as per the normal plan, although I have mixed in CFDs as well on the high rollers (don't post those trades)

I am trying to get set with the LPTs for this round, but they are steaming ahead of me, still, there is plenty of time yet.

Its been one of my better years & my dividend margin trading has produced around 90% return on capital for the year after interest, brokerage & dividends.....usually 30% to 60% for most years....this is for realised trades.

 

[j4mesa]

Re: Dividend, Share Price. Is there a connection?

G'day j4mesa,

I don't quite understand all your shorthand jargon, but yes, my dividend trading is travelling as per the normal plan, although I have mixed in CFDs as well on the high rollers (don't post those trades)

I am trying to get set with the LPTs for this round, but they are steaming ahead of me, still, there is plenty of time yet.

Its been one of my better years & my dividend margin trading has produced around 90% return on capital for the year after interest, brokerage & dividends.....usually 30% to 60% for most years....this is for realised trades.

- My apology for my bad english
- High rollers, do you mean high earnings ?
- LPT : Listed Property Trust ???? What is that for towards the dividend trading
- 90% is very good !!! congrats........

I think I should be more discipline on dividend trading.........all the best Don

 

[rozella]

Re: Dividend, Share Price. Is there a connection?

G'day j4mesa,

- My apology for my bad english
- High rollers, do you mean high earnings ?
- LPT : Listed Property Trust ???? What is that for towards the dividend trading

Looks like I am the same....sorry.

The high rollers, I mean S&P/ASX 20
LPT is Listed Property Trust

The LPT sector has stocks that pay a distribution quarterly or half yearly....generally it is the half yearly distributions that help to drive up the price. Here is a list of the ones I usually trade.....but you will need to make your own decisions.

None of these have given their estimated distributions yet, however, they will all go exdist on 25th June....their announcements will be only a few days before this.

SGP,CNP,DRT,CFX,IPG,MCW,CPA,VPG,CSF,TSO & CER

The last time I checked, they are in order of capitalisation, but a lot happens in this sector. On the 25th June there will be about 70 LPTs go exdistribution, but the above are the majors. WDC goes ex in August & February.

Cheers,

 

[j4mesa]

Re: Dividend, Share Price. Is there a connection?

Now everything seems to be connecting altogether.......
Thanks Don......

 

[dano065]

Re: Dividend, Share Price. Is there a connection?

Hi,
Even though I have been looking at this site for a while, this is only my 2nd thread. I hope this doesn't sound like 2 silly questions. I have been looking at a few stocks latley around the dividend end date. They seem to have all dropped as the the stock goes dividend- I think I understand why...but, is it a possible strategy to short a stock while it goes ex-dividend, to take advantage as the stock goes down from paying the share holders, is there any other major risk involved?

Also, is there a time limit on how long you need to hold stocks to take advandage of company dividend pay outs, do you have to hold the stock a certain amount of time to be intitled to dividends, or is the money you need to make it worth while not worth the risk?
Thanks

 

[rozella]

Re: Dividend, Share Price. Is there a connection?

G'day dao065,

...but, is it a possible strategy to short a stock while it goes ex-dividend, to take advantage as the stock goes down from paying the share holders, is there any other major risk involved?

Yes you are right that the stock usually drops the dividend amount, however, when shorting a stock the system works in reverse, & the shorter pays the dividend. The easiest way to short a stock is with CFDs & when holding a position over exdiv day, the dividend amount is deducted from your account....so it is not that simple.....I wish it was, it would almost be stealing.

Also, is there a time limit on how long you need to hold stocks to take advandage of company dividend pay outs, do you have to hold the stock a certain amount of time to be intitled to dividends, or is the money you need to make it worth while not worth the risk?

You can buy on the close the day before exdiv & sell on the open on exdiv day to be entitled to the dividend. It is the franking credit part that must comply with the 45 day rule & individuals have an exemption from this to trade under 45 days providing that their total franking credits for the year do not exceed $5000. $5001 & you forfeit all the franking credits that don't comply with the 45 day rule & can only claim those over the 45 days clear of the buy & sell days.

 

[rozella]

Re: Dividend, Share Price. Is there a connection?

Sold 2 parcels of LNN yesterday

Sold LNN yesterday @ 920.0
Bought 4th May @ 920.0 with a margin of 75%
Investment 230.0/share
Exdiv 4th June
Dividend 19.0/share fully franked 8.14/share
Gross profit 19.0/share = 8.26% return on investment. 31 days

Sold LNN yesterday @ 916.0
Bought 7th May @ 916.0 with a margin of 75%
Investment 230.0/share
Exdiv 4th June
Dividend 19.0/share fully franked 8.14/share
Gross profit 19.0/share = 8.26% return on investment. 28 days

 

[ozambersand]

Re: Dividend, Share Price. Is there a connection?

Lion Nathan hardly dipped at all going ex-dividend, you could have bought it on Friday and sold it on Monday and even made a slight profit if you timed it right... And got the dividend!

Pity they aren't all like that!!!!

Rozella, do you find the cheaper stocks that don't pay a big dividend in cash terms but do when you look at yield, actually hold up better through the dividend?

CSR is another case in mind. They paid 9c and share price is only 6 cents lower at close.

I bought Westpac and NABS and they currently SUCK! (I'm waiting for the 47 days though so am not panicking ......yet!)

 

[rozella]

Re: Dividend, Share Price. Is there a connection?

G'day ozambersand,

Rozella, do you find the cheaper stocks that don't pay a big dividend in cash terms but do when you look at yield, actually hold up better through the dividend?

I don't think there is much of a pattern as a lot depends on the market on exdiv day. Yesterday was a 56 pointer so there was a good probability that LNN would fare okay. I knew I would be away from the monitor all day, so I placed the orders at 7:30am knowing that the DOW shrugged off China's drop & it paid off.

The LPT's can sometimes return to your target price on exdist day, so I always place a sell order early prior to open......a quick turnover is sweet.

I bought Westpac and NABS and they currently SUCK! (I'm waiting for the 47 days though so am not panicking ......yet!)

Sometimes there is only a small window of opportunity to take a sell at a good price with the banks, so you must do your calcs if you are marginlending, as sometimes it costs more than the franking credit to wait the distance either with interest or a drop in price or both.

e.g. WBC has a 27.0/share franking credit & it dropped 14.0 cents today.
NAB has a 33.56/share franking credit & it dropped 34.0 cents today.

 

[ozambersand]

Re: Dividend, Share Price. Is there a connection?

Thanks for that advice, Rozella. I suppose I am a bit paranoid about having to pay tax! I will have to look at the big picture though and see if holding it for shorter periods justifies it, particularly if the money could be better spent elsewhere.

I don't have to worry about lending rates as I am still using instalment warrants. I am hesitant about margin lending. (My portfolio is small and I am not sure I have the capital base to qualify anyway)

The main drawback I am finding with the warrants is that it restricts what you can get involved in to certain companies (the bigger ones) and then the gearing can make a big difference to whether or not the dividend becomes worthwhile. Doing research, I have found enough warrants to get between 9% to 16% over a 12 month period, so that's OK.

The one big advantage I have is that the issuer has to buy them back (at the price as set out by their matrix) so you always have a buyer. Then you just have to hope that the underlying market behaves.

This works well when the market jumps suddenly in one direction with a trade that brings the corresponding buy/sell offer of the issuer's matrix into line (as long as their price reacts quickly enough) and if you are sitting there you usually* automatically get traded.

Using margin lending, you may have shares in the market at that same price that don't go as yu are too far down the queue, but the warrant has to go (providing the parcel on offer is lower than they are offering at the time). As I'm "small beer" really I usually manage to offload them OK.

*The "usually" is another story. ABNAmro withdrew their market once when the price was getting close (but they got rapped over the knuckles by the ASX when I complained and quickly put it back on).

Long term I wonder whether or not this rule abut "requiring to make a market at all times" will be viable for the issuers and I would not be surprised if it gets modified. If it does, I will have to review whether I stay trading this way.

Do you think the ability to be in and out with dividend plays is guaranteed to continue or will companies get jack of it?

 

[rozella]

Re: Dividend, Share Price. Is there a connection?

G'day ozambersand,

I used to do some installment warrants, however, I find marginlending more comforting & flexible....but we do best what we know best. If you specialise with warrants & are successful, then keep doing it.

Do you think the ability to be in and out with dividend plays is guaranteed to continue or will companies get jack of it?

I think dividend trading is becoming stronger. Shares are changing hands more often but still the same amount of shares & the prices are increasing...why would they become concerned ?.....I don't think there is any problem with this....the brokers would also be happy.

 

[rozella]

Re: Dividend, Share Price. Is there a connection?

Bought SPN yesterday on the close @ 153.0 with a margin of 70%
Investment 45.9/share
Exdiv 6th June (today)
Dividend 5.635/share 9% franked 0.217/share

Bought MIG on the open today @ 372.0 with a margin of 80%
Investment 74.4/share zero franked ?
Announcement expected 15th June
Exdiv expected 25th June
Last years dividend was 11.0/share zero franked.

 

[rozella]

Re: Dividend, Share Price. Is there a connection?

Bought another parcel of MCW on the open today @ 220.0 with a margin of 75%
Investment 55.0/unit
Distribution announcement expected 20th June
Exdistribution expected 25th June
Last years dist was 7.8/unit zero franked.

 

[ozambersand]

Re: Dividend, Share Price. Is there a connection?

I have a question about selling shares after they go ex-dividend.

I had read that if you sold the day they went ex-dividend then you were still entitled to the dividend as long as you had bought them at least the day beforehand.

However, I have also read that:

Books close
When a company declares a dividend, in addition to the amount per share, it also declares a books closing date (the record date). This means that all shareholders who are on the company's share register at that date will receive the dividend.
But in order to be on the share register at that date, investors need to have bought the shares at least three business days earlier. It's all to do with what's known as T+3 settlement. When investors buy shares through their broker, the moment the trade is executed the investor is the economic owner of the stock and gains, or loses, from movements in its price.
But the actual day the trade is settled - when money is exchanged and the stock transferred from seller to buyer - doesn't occur until three business days after the trade is executed.
This gives the people whose job it is to execute settlement a chance to iron out any problems or disputes before settlement day. So, in order to hold stock on the books closing date, and therefore receive the dividend, you need to have bought it three business days earlier. Intelligent Investor

What happens if you sell on ex-dividend date and the settlement of the trade is done before the record date? Do you lose your entitlement to the dividend?

Who sets the ex-dividend date, is it the ASX doing the calculations or the company?

If it is the company, what is there to stop them making the date longer than the T+3 and catching people out that way?
Take Lion Nathan for example. The ASX has its ex-dividend date as 4th June and the record date as the 8th June (which is actually T + 4) and the settlement went through on the 3rd. Does that mean I have missed out on the dividend????
What happens also if the "people whose job it is to execute settlement " are extra efficient and iron it out earlier than the three days. Does that mean that even if you calculated R-3 for selling, you may still miss out?

I know that to be safe you could keep it for longer, but the price often goes down right until the record date and if I was happy with the return on my buy price I would like to get out ASAP especially if I wanted to get into something else.

Has anyone ever been caught by selling it too early in this way?

 

[rozella]

Re: Dividend, Share Price. Is there a connection?

G'day ozambersand,

You can buy as late as the close the day before exdiv date, & sell on the open on exdiv date & be entitled to the dividend. The contracts for buy & sell determine who the owner of the shares are. The owner of the shares at prior to open on exdiv date is entitled to the dividend, so don't let anyone tell you any different.

Exdividend date is 4 business days prior to record date. From the buy contract date, settlement is in 3 business days. The registry does not know that you own the stock until settlement, so if you buy the day before exdividend, then you have 1 day to register your TFN & method of payment of the dividend. If for some reason you do not register by record date, you are still entitled to the dividend (as you are the owner) however, the registry will deduct 48.5% withholding tax from your dividend amount & give it to Johnny. (you can claim back at tax time, but who needs the extra hassle)

If you are going to trade a dividend strategy, then it is important to do the registering yourself by going onto the registry websites (it is free) & become a member & receive a password etc. Then you can do your registering yourself online in most cases. Don't leave it to the broker to register for you if you are cutting it fine with time.

It probably seems complicated the 1st time, but when you specialise in trading this way, it becomes part of every day trading.

If you are doing a lot of these, it is best to set up a spreadsheet, so you don't miss any.....anyway it is easier to keep track of your dividends & projections.

If you are stuck with the registry, let me know & I will see if I can help....this is Mrs rozella's job.

 

[ozambersand]

Re: Dividend, Share Price. Is there a connection?

I hope you're right Rozella. I will soon know if my Lion Nathan dividend doesn't come through!

My main worry is the selling bit, as I said, I sold my shares after open on ex-div date and they were settled before the record date.

I will take your advice on the registry.

I do have a spreadsheet set up.

I see the ASX defines ex-div date as:
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

A lot of companies don't even mention the ex-dividend date, just the record date. Which is strange as theoretically whoever bought my shares would still have had the T+3 before record date (4 business days). So who defines the ex-dividend date, the company or the ASX?

I noticed on checking that a couple of companies had an even longer gap this year. IAG and QBE had ex-div dates of 7/3 and record dates of 14/3 which is 5 full business dates after the ex-dividend date (T+5).

I imagine a lot of the situation is a hangover from days when everything wasn't so instant with computers. Now, they could probably have a pretty accurate figure in minutes once they are all registered on the computer.

Hence my concern.

On a related but different note. What happens if you sell and buy the same quantity of shares on the same day. Would the registry notice it and change? ie if I own some shares and have all the details registered but sell them on the day before ex-div date and buy them again a few hours later. Would the registry details have been changed in the meantime? ie do I still have to ensure my tfn etc are current at the time of ex-div?