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Stocks about to go XD

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Muschu

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(Joe if this fits better inside another thread then please shift it).

I am curious as to whether there is a pattern of a (false?)SP escalation in the period just prior to a stock going XD.

And I am also uncertain as to what is meant by 'dividend stripping'.

I would appreciate comments / advice.

I am speaking as a person who is in the pension phase of a SMSF.

Thanks

Rick
 
Muschu said:
(Joe if this fits better inside another thread then please shift it).

I am curious as to whether there is a pattern of a (false?)SP escalation in the period just prior to a stock going XD.

And I am also uncertain as to what is meant by 'dividend stripping'.

I would appreciate comments / advice.

I am speaking as a person who is in the pension phase of a SMSF.

Thanks

Rick
Click to expand...

I can't say for certain about a SP escalation prior to paying a dividend, but I can tell you that dividend stripping essentially means buying a stock BEFORE it goes XD, holding until the XD date, then selling the stock.
The idea of this is that you get the benefit of the dividend and you don't take a capital loss equal to or larger than the dividend you've received.

From my minimal exposure to it all, I haven't noticed any solid patterns of what happens when the stock goes XD. For example, RCG seems to have kept the same SP after going XD, while BRG has dropped about 20c for an 11c + franking credits dividend...
 
I had an order filled for QBE at 1240 when they released their results (I was astounded).
Sold at 1310 ex div and ran.

Some stocks get dumped at reporting due to the overall market sentiment and vague speculation re the future. ILU was another one...went to 778 at one stage, back up to 10 with a div.

Then, on the other hand came TSE which may, or may very well not do the same thing!

The stocks mentioned may well end up on a downward trend over 8 months, but over 8 weeks...
 
Muschu said:
I am curious as to whether there is a pattern of a (false?)SP escalation in the period just prior to a stock going XD.
Click to expand...

Hi Rick

Curious about your question - are you looking to trade the index?

Kind Regards

Andrew Newman - Financial Adviser
 
Muschu said:
(Joe if this fits better inside another thread then please shift it).

I am curious as to whether there is a pattern of a (false?)SP escalation in the period just prior to a stock going XD.

And I am also uncertain as to what is meant by 'dividend stripping'.

I would appreciate comments / advice.

I am speaking as a person who is in the pension phase of a SMSF.

Thanks

Rick
Click to expand...

When TLS went ex-dividend a few weeks ago it took the whole index down. Don't forget that if you want to dividend strip you need to hold onto the stock for at least 45 days to be able to claim the franking credit (important to a pension account).

I don't practice dividend stripping as a share buying system but I have observed that it might be useful with the large cap stocks (where share price volatility is generally lower) because, ceteris paribus, these stocks tend to drop in price by about the value of the dividend when the go ex-dividend, which would allow you to cream the franking credit. IMHO that is a lot of outlay for little return (relative to risk to capital) given you have to wait until you get your tax return to see the money. If a half yearly dividend approximates a yield of 3.5% then the franking credit would represent a 1% return on funds invested. I think it can be a consideration for timing when buying into a stock.

For the large caps at least you do see the dividend getting priced in as the ex-dividend date approaches and then disounted out when it goes ex-div.
 
tinhat said:
When TLS went ex-dividend a few weeks ago it took the whole index down. Don't forget that if you want to dividend strip you need to hold onto the stock for at least 45 days to be able to claim the franking credit (important to a pension account).

I don't practice dividend stripping as a share buying system but I have observed that it might be useful with the large cap stocks (where share price volatility is generally lower) because, ceteris paribus, these stocks tend to drop in price by about the value of the dividend when the go ex-dividend, which would allow you to cream the franking credit. IMHO that is a lot of outlay for little return (relative to risk to capital) given you have to wait until you get your tax return to see the money. If a half yearly dividend approximates a yield of 3.5% then the franking credit would represent a 1% return on funds invested. I think it can be a consideration for timing when buying into a stock.

For the large caps at least you do see the dividend getting priced in as the ex-dividend date approaches and then disounted out when it goes ex-div.
Click to expand...

You may want to check with your accountant:
I'm pretty sure the 45-day rule only applies if the franking credits exceed $5,000.
 
pixel said:
You may want to check with your accountant:
I'm pretty sure the 45-day rule only applies if the franking credits exceed $5,000.
Click to expand...

I am no tax expert, but I believe the small investor exemption to the 45 day rule applies only if your entire franking credits for the current year do not exceed $5,000 (across all your holdings).
 
tinhat said:
I am no tax expert, but I believe the small investor exemption to the 45 day rule applies only if your entire franking credits for the current year do not exceed $5,000 (across all your holdings).
Click to expand...

apologies; that's what I meant to say:
"... if the franking credits for all your dividends in the Financial Year exceed $5,000"
 
Not just the fact it's cum div look for the price drop - qbe at 12 and ncm at 24 would have given div and capital return
 
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