Dividend, Share Price: Is there a connection?

[rozella]

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

G'day Fool,

I trade both CFDs & conventional marginlending. I find it easier to trade the dividend strategy with conventional marginlending as wider swings are required, however, I use CFDs to trade the S&P/ASX 20 but only with about 5% to 10% of my trading capital.

CFD
There is no ownership of the share so no asset
Interest is calculated on 100% of the purchase price changing each day (mark to market) so as the share price increases you pay interest on a higher value each day.
Interest is capitalised to the loan
No franking credits
High leverage
No buffer
S&P/ASX 20 LVRs are 95% to 97% with my provider
Margin calls usually intraday

Marginlending
Ownership of shares
Interest is calculated on the LVR amount & remains on that amount.
Interest is normally capitalised to the loan
Franking credits if eligible
Reasonable leverage
Usually another 10% buffer
Margin calls usually the next morning
LVRs on shares that I trade 70% to 80%

Comment
Today the market is down 132.2 points atm & I was into my buffer with three margin loans at open....but I am nowhere near a margin call.
I am glad that my CFD account is only small compared to the other accounts as my capital dropped about 30% (cfd acct) on open & have been very near an intraday margin call most of the day, but I will sell something to balance up if it falls more. BHP & RIO are the main culprits.

I prefer to use conventional marginlending with the bulk of my working capital as over a period it is far more rewarding for me.

rozella

 

[Fool]

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

Thanks very much for sharing Rozella,

I saw that your ZFX hit your stop loss, are you planing to re-enter?? I am weighing it up atm.

 

[prawn_86]

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

I have recently been looking into dividend strategies.

I am doing it via CFD's Fool.

I have low income so taxation implications are not a problem at this stage.

Here is my theory...please let me no if it make sense. Rozella i would appreciate your input also.

If a div yeild is greater that the margin % on the CFD then it represents a strong buy, as you will instantly be making over 100% profit on your margin invested, meaning it would need to fall massively ex div to not make any profit at all.

I can give an example if anyone is interested.


** this is just an idea and has not been tested yet **

 

[rozella]

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

Thanks very much for sharing Rozella,

I saw that your ZFX hit your stop loss, are you planing to re-enter?? I am weighing it up atm.

It hit the stoploss & was sold 17th October on the exdividendwatchlist portfolio @ 1754.0 & yes, we will re-enter if the opportunity arises.

If you are referring to my posts on this forum of my personal trades, then I am still holding.....I take a much more discretionary view depending on the state of the market.

Even though ZFX fell below my stoploss I am still holding.....commonsense must prevail when we have these kneejerk corrections. 1753.0 is about my stoploss for my last 2 buys & it closed at 1717.0 yesterday. Even though the DOW was up 44.95 points last night, zinc dumped $116.50/tonne.

I am fully in the market atm & ZFX is at my maximum holding so I am not prepared to buy more, however, I would be if my holding was lower. I am not prepared to hold more than 15% of total portfolio of any stock.

It is a matter of taking each day as it comes.

 

[Fool]

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

thanks Rozella, Appreciate it, helps us Newbies learn how dividend trading works.

 

[Fool]

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

Well today I decided to give it a shoot, I got 2500 ZFX @ $17.64 and as Rozella was saying “commonsense must prevail”, so I have a very loose stop atm. Now my question is as a general rule does the share price drop as a % of the dividends like below?

70cent dividends
say ex dividends date SP =17.70

70cent is %3.9 of 17.70 = 0.6903

Therefore you would expect it to drop to ~17.0097


Profit from dividends = $1750
$44100(2500@ $17.64)-$42525(2500@ $17.01)
=-1575


Profit pre fees= $175

So is it sometimes wise to sell before the ex dividends date and just be happy with SP of $18+??


Once again I am new to this so be nice…

 

[Nyden]

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

Well, sometimes what happens is; the SP will rise in the last few days leading up to the exdiv / on the books date (hopefully close to the equiv of the div!).

And then in most instances; the SP does generally fall to that equiv as well.

I guess the trick is obviously to buy low
Or hold for long enough after the exdiv date...until the price is more comfortable.

If someone believes different? Please post

Well today I decided to give it a shoot, I got 2500 ZFX @ $17.64 and as Rozella was saying “commonsense must prevail”, so I have a very loose stop atm. Now my question is as a general rule does the share price drop as a % of the dividends like below?

70cent dividends
say ex dividends date SP =17.70

70cent is %3.9 of 17.70 = 0.6903

Therefore you would expect it to drop to ~17.0097


Profit from dividends = $1750
$44100(2500@ $17.64)-$42525(2500@ $17.01)
=-1575


Profit pre fees= $175

So is it sometimes wise to sell before the ex dividends date and just be happy with SP of $18+??


Once again I am new to this so be nice…

 

[rozella]

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

G'day fool,

I also mentioned that I would not risk a holding of more than 15% of portfolio & have also mentioned on a few earlier posts that this percentage is based on holding 10 to 15 stocks using a stoploss of 3% on each stock. This means that if my largest holding drops to its stoploss it is only 0.45% of portfolio & that is why I have room to use some discretion.

With my marginlending, I always allow at least a drop on exdiv day of dividend + franking credit, whether I am entitled to the franking credit or not.

I expect a stock to drop at least this much on a low market day & drop less than the dividend on a good market day.

So in the case of ZFX, I am prepared for it to drop div + fc = 100 cents/share

Yes, I almost always take the profit if the stock rises an amount about equal to the dividend prior to exdiv. Why let the canary out of the cage so you can try & catch it again. The lure of the dividend, gives a stock a reason to rise

There is no fixed time frame that the stock will return to our buy price & the same stock is usually different each time around. It could return on the exdiv day (it happens many times but don't count on it) but generally within about 3 to 6 weeks.

Last year my average open days per stock was 37.3 days, this includes those that I have not stayed for the dividend.

 

[Fool]

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

thanks guys loving the help, I guess now we play the waiting gaming, i still have over have cash left.

 

[Fool]

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

can anyone tell me what XTSXOS means? i take it its something to do with after hours trading?? looks like a big order when through and how come the price level is 17.609??

 

[roland]

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

can anyone tell me what XTSXOS means? i take it its something to do with after hours trading?? looks like a big order when through and how come the price level is 17.609??

Hi,

I did a search for you:

The codes represent an off-market transaction (XTSXOS).

It is actually three codes combined, where:
XT - Crossed trade
SX - Portfolio special crossing
OS - Overseas.

 

[rozella]

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

Sold my 2 parcels of ALS yesterday @ 1115.0, my worst trade for a very long time....should know better.

Sold ALS yesterday @ 1115.0
Bought 30th July @ 1400.0 with a margin of 65%
Investment 490.0/share
Exdiv date 14th August
Dividend 36.0/share fully franked 15.43/share
Gross loss 233.57/share = 47.66% loss on investment, incl fc. 95 days

Sold ALS yesterday @ 1115.0
Bought 1st August @ 1401.0 with a margin of 65%
Investment 490.35/share
Exdiv date 14th August
Dividend 36.0/share fully franked 15.43/share
Gross loss 234.57/share = 47.83% loss on investment, incl fc. 93 days

Converted all proceeds (what was left) into SGP

Bought SGP yesterday @ 896.0 with a margin of 80%
Investment 179.2/unit
Distribution announcement expected about 18th December
Exdistribution expected 21st December
Last years dist was 21.5/unit 19.1% franked

 

[Fool]

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

thanks for the update Rozella, are you holding WES WESFARMERS??

 

[rozella]

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

thanks for the update Rozella, are you holding WES WESFARMERS??

Yes I am....both with marginlender & CFDs....so far very good.

 

[rozella]

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

Sold WBC today @ 3027.0
Bought 16th October @ 2920.0 with a margin of 75%
Investment 730.0/share
Announcement 1st November
Exdiv 7th November
Dividend 68.0/share fully franked 29.14/share
Gross profit 175.0/share = 23.97% return on investment, excl fc. 22 days

 

[brodion]

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

Can Anyone please tell me as to the problem with riding the increase of a stock as it nears its dividend payment.Do all stocks go up as it nears its ex-divodend? I do not wish to receive a dividend but only ride the stock value increase (the last week say)....Thankyou

Church man

 

[rozella]

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

Can Anyone please tell me as to the problem with riding the increase of a stock as it nears its dividend payment.Do all stocks go up as it nears its ex-divodend? I do not wish to receive a dividend but only ride the stock value increase (the last week say)....Thankyou

Church man

The basis of my strategy is 'The lure of the dividend, gives a stock a reason to rise'

You mention 'do all stocks'
Well the answer is no.....but if the stock has:
1. Increased profit
2. Increased dividend
3. A good outlook statement for the future
Then there is a reasonable probability that the stock will rise on the lead up to exdividend date.

 

[roland]

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

Sorry if this question has been answered already. The percentage listed as Dividend Yield is, as I understand, the percentage of yield based on a 12 month average of the SP.

If Dividend Stability is listed as being 100% or close, does this mean that we could expect the same percentage of SP being maintained - even if, for example, the SP doubles?

I guess the above question has an obvious answer - what I am really wanting some feedback on is people's experience on dividend returns growing or declining without reinvesting into said stock.

I have generally not worried too much about dividends, concentrating more on capital gains on SP changes - but just got struck on the head with thinking about the percentage of return based on SP. If we have a good growth stock then the percentage gain in Dividend value would be growing based on the SP rising.

So an initial investment of $10,000 now, with a dividend yield of 5% would be $500. Next year if the SP were to double (for arguments sake) the yield would still be 5%, which would be a return of $1,000 - so in effect, without additional investment my yield would actually be 10% on my original $10,000


mmmm, this makes dividend hunting a little more interesting...

any comments? Good or bad

 

[bvbfan]

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

I think the dividend yield is generally based of the last closing price. I guess some may provide it of the last traded price.

Dividend stability would be the chance of the dividend being the same as the previous year (or greater) in dollars (or cent per share) terms
So if the company has been paying high dividends then drops the following year the stability should change as I underestand it.

 

[Warren Buffet II]

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

Sorry if this question has been answered already. The percentage listed as Dividend Yield is, as I understand, the percentage of yield based on a 12 month average of the SP.

If Dividend Stability is listed as being 100% or close, does this mean that we could expect the same percentage of SP being maintained - even if, for example, the SP doubles?

I guess the above question has an obvious answer - what I am really wanting some feedback on is people's experience on dividend returns growing or declining without reinvesting into said stock.

I have generally not worried too much about dividends, concentrating more on capital gains on SP changes - but just got struck on the head with thinking about the percentage of return based on SP. If we have a good growth stock then the percentage gain in Dividend value would be growing based on the SP rising.

So an initial investment of $10,000 now, with a dividend yield of 5% would be $500. Next year if the SP were to double (for arguments sake) the yield would still be 5%, which would be a return of $1,000 - so in effect, without additional investment my yield would actually be 10% on my original $10,000


mmmm, this makes dividend hunting a little more interesting...

any comments? Good or bad

Normally companies increase their dividends based on previous dividends payments and not on share price.

So they normally say "An increase of 10%", that is from prev paid divds.

Now, if share price raises too much in relation to the divds itself the yield will fall and the if the share price falls the yield will rise.

WBII