Re: Dividend, Share Price. Is there a connection?
Hi Rozella, thanks for the response - How was the golf game?
I do not allow franking credits to control my trading.....when I believe my target is maximised I sell as this can be risky waiting to comply with the 45 day rule. The example of WES....franking credit was 57.86/share.....the risk of price drop is high while waiting to reach the holding rule
There was a number of rules that I had when evaluating a stock for it's potential in the strategy. Most of which were designed to reduce the risk of getting a dud and complying with the 45 day holding rule - EG portfolio approach towards transactions. I'll cover off against these rules that I had as we go forward, but as I said in my first response I didn't want to type a monster of a post
Just trying to understand the number of trades that you are doing per year from your post.....is it 30 maximum ? Is trading your prime occupation ?
As I said in my first post I'm reminiscing about a strategy I employed back during the last correction of the market. I little bit about me.....I'm an
ex stockbroker. Currently trading is not my prime occupation - for a number of reasons.
Ok so as I said one of the things that I would do in my strategy (Given that I wanted/needed the franking credits), was to purchase the stock so that I was able to exit on the day it went ex-div. But how did I evaluate the stock to lower the risk? I had a list of rules that I would structly follow and here are the first of them.
1) History - As I said in my previous post - Its possible to have a company pay an unequal final or interum dividend. If the company has a trackable history of doing so they would get a point under my system. If the company has a ten year history of paying dividends consistently that would also get them a point.
2) Size of Individual dividend - The individual dividend needed to be larger than 5% ungrossed. Anything smaller than this and the costs of transaction could be detrimental to the exercise. The larger the dividend the better. One point for above 5% div.
3) Liquidity - If a target met the above three characteristics, I would generally look a little deeper (it wasn't that hard as remember I would be targeting those stocks in 60 day rotations and wanted stocks that would go ex-div within a week of each other). So I'd only be looking at about 20 stocks max. I would go look at course of sales data of the previous year when the stock had gone ex dividend and determine how liquid the stock was previously. If on the day of exdiv the stock had a liquidity of 50% or greater of a monthly average it would get a point. I would also check out the registry number and major holders (if any). If any of the stocks had a substantial long term shareholder holding that hadthe potential to reduce the liquidity that would lose them a point.
This post is turning into a monster I'll leave it there for now and come back later when I have some time.
Sir O,