Dividend, Share Price: Is there a connection?

[rozella]

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!

Obviously on LNN you are banking on the broker doing the registering....you did not say when you bought. If you owned it prior to exdiv date & held until exdiv date then sold....you will receive the dividend, however, to receive the full dividend will depend whether your broker registered you in time. It is easy enough to check by going to http://www.computershare.com.au
If you are not a member, you should register. In the left hand menu, click on TFN/ABN. Under that in the menu, there are bank details. This part is okay as they will send you a cheque, but you can opt for direct deposit.

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).

There is a reason for this. 12th March was a non-business day (although the market was open) due to Labour Day in Vic (banks not open etc)

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?

As the details come through, the registry adds or subtracts quantity. It is always worth checking online whether your details are up to date....rarely have I had a problem

You will find that when you sell the shares, your details may stay with the registry for many months with a nil quantity balance....so as I said before, the 1st thing to do is check online to see if your details are there before sending through more details.

Sometimes I will buy/sell a stock 3 or 4 times prior to the dividend then buy back for the dividend & we make sure we are registered each time, as if we don't, there is a danger of missing one & then it is too late.

I just re read your quote from Intelligent Investor....there is an incorrect statements there
i.e.

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.

They are saying that you need to buy 3 days before record date, which would be the day after exdiv date....not good....exdiv date is 4 business days before record date.

 

[rozella]

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

Sold 2 parcels of ANZ today to finance other purchases.

Sold ANZ today @ 2930.0
Bought 26th April @ 3095.0 with a margin of 75%
Investment 773.75/share
Exdiv 14th May
Dividend 62.0/share fully franked 26.57/share
Gross loss 76.43/share = 9.88% loss on investment, incl fc. 53 days

Sold ANZ today @ 2930.0
Bought 10th May @ 3070.0 with a margin of 75%
Investment 767.5/share
Exdiv 14th May
Dividend 62.0/share fully franked 26.57/share
Gross loss 78.0/share = 10.16% loss on investment, excl fc. 39 days

Bought DRT today @ 192.0 with a margin of 75%
Investment 48.0/unit
exdist expected 25th June
Last years distribution was 5.55/unit zero franked.

Bought CFX today @ 223.0 with a margin of 75%
Investment 55.75/unit
exdist expected 25th June
Last years distribution was 5.64/unit zero franked.

 

[rozella]

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

Sold DRT today @ 199.0
Bought 18th June @ 192.0 with a margin of 75%
Investment 48.0/unit
exdist 25th June
Distribution 5.7/unit zero franked.
Gross profit 7.0/unit = 14.58% return on investment. 2 days

 

[rozella]

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

Sold CFX today on the close @ 233.0
Bought 18th June @ 223.0 with a margin of 75%
Investment 55.75/unit
exdist 25th June
Distribution was 5.9/unit zero franked.
Gross profit 10.0/unit = 17.94% return on investment. 2 days

 

[lcorteen]

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

Hi Rozella

I am very new to trading & it's really helpful to see exactly what other's are trading - entry and exits, stops and profit targets, so thanks for your time.

Wondered if you would look at AEU - it is going ex div on 25/6 with div of 14 odd cents. What would be your strategy? Not sure if you are aware of the Investor Centre software which has an indicator that shows when big money (unusually large parcels) of money go on a stock, usually after market so they don't show up on volume... anyway, there has been a lot of big money going into this stock in the last 5 days and none for about a year. I note there is also a fin report due in july for AEU.

Look forward to your response

 

[rozella]

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

G'day lcorteen,

AEU pays a distribution quarterly, this time being 3.7 cents. Total for the year is 14.6 cents.

It does not meet my basic criteria to be on my personal watchlist, as even with marginlending, this distribution only yields 4.05%. My initial criteria is 10% or better.

I am not saying that there is anything wrong with the stock, just that it does not fit my strategy rules.

 

[lcorteen]

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

Cheers!

 

[rozella]

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

Bought STW today @ 6360.0 with a margin of 70%
Investment 1908.0/unit
exdist 25th June
distribution 244.4859/unit

I traded this one last December for the distribution & all turned out okay.

 

[ozambersand]

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

Rozella, as you'be been doing this for a while, have you noticed whether the drop and recover after the dividend is different at different times of the year?

For example, the banks really take a hit after the dividend in the first half of the year but seem to be better in the second half of the year.

Similarly, the property stocks take a battering now but again seem to rebound better/not drop as much in the later part of the year.

Is that what you find?

 

[rozella]

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

G'day ozambersand,

The situation is nearly always random....what can be a great stock this round can be a 'dog' the next. Many spend countless hours trying to find a pattern, but life is not that easy....much depends on the flavour of the market as to rebounds immediately.

Now if the DOW was up 185 points on Friday, then there would be quite a few of the 80+ trusts that were quoted exdist today, back to their pre-exdist prices. I always place my LPT sell orders in prior to open on exdist day & many times can jag a sale in the open.

I have found that on exdividend/exdistribution days, if we have a good market day, the price recovers a reasonable amount of the dividend + franking credit & sometimes regain the whole lot.

On an ordinary day they may drop the dividend only.

On a day like today, they could possibly drop the dividend + franking credit + maybe more.

But don't panic, today there was probably a bit of overkill & hopefully a part recovery tomorrow.

Banks & LPTs can sometimes take upto 65 days to recover. Okay you might be entitled to the banks franking credit but if you are marginlending, the interest wipes out the franking value at about 45 to 55 days depending on the LVR, so it is a mathematical equation to decide when to sell & move on to the next.

 

[rozella]

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

Needed to draw on some dollars today for another project, but in hindsight should have done it a week ago when some of the prices were higher.

Sold JST today @ 431.0
Bought 23rd April @ 445.0 with a margin of 60%
Investment 178.0/share
Exdiv 7th May
Dividend 9.5/share fully franked 4.07/share
Gross loss 0.43/share = 0.24% loss on investment. 66 days

Sold ENV today @ 115.5
Bought 2nd May @ 123.0/unit with a margin of 65%
Investment 43.05/unit
Exdist date 7th May
Distribution 3.8/unit zero franked
Gross loss 3.7/unit = 8.59% loss on investment. 57 days

Sold NAB today @ 4090.0
Bought 10th May @ 4335.0 with a margin of 75%
Investment 1083.75/share
Exdiv 1st June
Dividend 87.0/share 90% franked 33.55/share
Gross loss 124.45/share = 11.48% loss on investment. 49 days

Sold MIG today @ 354.0
Bought 6th June @ 372.0 with a margin of 80%
Investment 74.4/share zero franked ?
Exdiv 25th June
Dividend was 10.0/share zero franked.
Gross loss 8.0/share = 10.75% loss on investment. 22 days

 

[ozambersand]

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

Ouch those figures will put in a dent in your good year - or is that good in terms of tax?!!!

Rozella, pundits say that dividend yield plays only work in a bull market, so would you revise your strategy if you felt a bear market was likely in the next 6 months?

Why I say that, is that many companies share prices are being seriously hit once they report (eg Metcash, Caltex, Brambles, CocaCola) as the profits aren't as good as expected.

Given that a lot of companies will be reporting in August, do you think this will have an effect on the market which might make dividend yield trading risky?

Or will you just rely on tight stops?

 

[rozella]

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

G'day ozamberland,

Ouch those figures will put in a dent in your good year - or is that good in terms of tax?!!!

Those sells in the previous post have not much to do with the dividend strategy as I had given myself a deadline of next Tuesday to withdraw some capital for another project & those sales achieved that, & yesterday was the best opportunity I have had in recent days.

Rozella, pundits say that dividend yield plays only work in a bull market, so would you revise your strategy if you felt a bear market was likely in the next 6 months?

I can't agree with the pundits.....I have been trading this way for the last 9/10 years with plenty of ups & downs including disasters....the pundits probably have not tried the strategy over a period for a genuine comment.

Why I say that, is that many companies share prices are being seriously hit once they report (eg Metcash, Caltex, Brambles, CocaCola) as the profits aren't as good as expected.

In a bear market, one should be more cautious & wait for the report. To buy prior to the announcement is a calculated 'gamble' & this can be worth it in a bull market as we know.

Those stocks you mention don't generally suit the criteria for dividend trading....MTS maybe, if you bought around 21st & 22nd June.....I have traded this one before many times. I have learnt my lesson with low yielders long ago, although I do trade BXB with CFDs but not as the dividend strategy.

Given that a lot of companies will be reporting in August, do you think this will have an effect on the market which might make dividend yield trading risky?

Just the opposite, I am looking forward to a good reporting season.

 

[ozambersand]

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

I have been doing a bit of mucking around this weekend with the XJO (ASX200 index) figures for the last financial year.

My main aim is to create a record for myself of the major effects on the market for a guide as to likely reactions from similar effects. (I know it's always different, but got to start somewhere

I added other things that I think affect the market - in this case major stocks going ex-dividend as it can really affect a market.

That's why I chose this index rather than the XAO as I thought it would be the one most affected by dividend yield trading.

If anyone can identify other factors/dates that I missed, I would be grateful if you could point them out.

There are a few major drops without tags but I can't remember what would have spooked the market.

For example the index went down suddenly between the 3rd and 8th January (was there an interest rate hike?) It also had a big increase between the 2nd and 4th April. Why?

It's interesting to see how smooth the market is when there isn't many companies going ex-dividend eg January and October!

 

[Warren Buffet II]

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

Hi ozambersand,

Nice graph, can you put one where you can see the months in there, I can only see the year.

WBII

I have been doing a bit of mucking around this weekend with the XJO (ASX200 index) figures for the last financial year.

My main aim is to create a record for myself of the major effects on the market for a guide as to likely reactions from similar effects. (I know it's always different, but got to start somewhere

I added other things that I think affect the market - in this case major stocks going ex-dividend as it can really affect a market.

That's why I chose this index rather than the XAO as I thought it would be the one most affected by dividend yield trading.

If anyone can identify other factors/dates that I missed, I would be grateful if you could point them out.

There are a few major drops without tags but I can't remember what would have spooked the market.

For example the index went down suddenly between the 3rd and 8th January (was there an interest rate hike?) It also had a big increase between the 2nd and 4th April. Why?

It's interesting to see how smooth the market is when there isn't many companies going ex-dividend eg January and October!

 

[ozambersand]

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

Hope this version is better. Have done my own research and worked out what those sudden moves were in reaction to.

 

[kerosam]

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

hello rozella,

1. how can i use this strategy with CFDs? Long the share till the day it XD. But i'm unsure whether there is a tendency of paying more on the cost of holding the share than the dividend received.

2. from your website, your stop loss is 3%. Do you apply this constant figure through all your trades?

3. Is this strategy merely dividend stripping? i.e. buy in for the dividends and say good bye to it after XD.

4. Any specific type of companies that work well with this strategy or just companies that pay dividends?

thanks in advance.

 

[rozella]

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

G'day Kerosam,

1. how can i use this strategy with CFDs?

I do it with CFDs as well, but they are not posted. The interest is more, however, the volume purchased is more.

But i'm unsure whether there is a tendency of paying more on the cost of holding the share than the dividend received.

If you have the time, you could use some of the trades on my website & recalculate with CFDs....the buy/sell prices & the holding period will be the same.

2. from your website, your stop loss is 3%. Do you apply this constant figure through all your trades?

Yes

3. Is this strategy merely dividend stripping? i.e. buy in for the dividends and say good bye to it after XD.

I prefer to call it dividend trading as dividend stripping usually refers to stripping the franking credit.

But yes....I am very happy if I can achieve a profit equal to the dividend on every trade.....& keep churning.

4. Any specific type of companies that work well with this strategy or just companies that pay dividends?

Yes, it is better to filter out the high yielders, as they are the ones that have a higher probability of increased price on announcement, subject to announcement results.

Note: the trades that I post on the forum are not the same trades that are on my website....the website portfolio only uses end of day data & selling is only when a stop is hit.....my own posts are intraday day trades with much more discretion.

This is the exdividendwatchlist comparison results over the past 3 years, using end of day data only, selling when stops are hit allowing profits to run. Franking credits are not included in the profit calculations.

This is a very basic strategy just to show that there is merit in trading cum-dividend stocks.

 

[rozella]

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

Have not posted much here this month...mainly because most of my stocks were edging up nicely & I was fully in the market....& very busy etc etc, however, this week took a different slant on things & in the last 2 days I closed 23 trades....was not a pretty week.

I have almost a clean slate now & will see which way the market will jump.....it is actually not a bad time for a correction, just as the reporting season is about to kick off. After the big drop-off in September 2001, my best trading month ever is still October 2001.

 

[rozella]

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

Bought 2 parcels of AFI today

Bought AFI today @ 587.0 with a margin of 70%
Investment 176.1/share
Exdiv date 1st August
Dividend 13.0/share fully franked 5.57/share

Bought AFI today on the close @ 589.0 with a margin of 70%
Investment 176.7/share
Exdiv date 1st August
Dividend 13.0/share fully franked 5.57/share

Bought ALS today on the close @ 1400.0 with a margin of 65%
Investment 490.0/share
Exdiv date 14th August
Dividend 36.0/share fully franked 15.43/share

Sold ANZ today @ 2805.0
Bought 19th April @ 3095.0 with a margin of 75%
Investment 773.75/share
Exdiv 14th May
Dividend 62.0/share fully franked 26.57/share
Gross loss 201.43/share = 26.03% loss on investment. 102 days