Newbie dividend question

Hi all,
I am VERY new at this game of shares.

I hold a very small portfolio that pays me dividends each 6 months.

Now my (silly) question is....How long do you have to hold a share before dividends are payable? eg: why can't I simply look up which co is due to pay dividends next month, throw a few thousand dollars in and pull out again once the dividend has been paid then move onto the next co who is due to pay on the next month??

Sillyblonde

 

Hi SB

Once you have got ownership of a share, you can receive dividends.




Johny.

 

hmmm so my plan of moving my $$$ on the dividend round about could work ??

My (sillyblonde?? ) plan is to take maybe $10K and play the dividend game for 12 months. The idea is to leave the dividend value in the stock and just keep shifting the $10K. If I choose 12 stocks and rotate the 10K for 5 years or so, the theory is to build a (half) decent portfolio without costing too much.

Silly??

 

You will incur a lot of trading costs and (possible) capital gain tax. Also the value of shares has the price of dividends built in.





Johny.

 

Thanks Johnny

Trading with Commsec = $20 (cost of doing business)

please explain how I would be hit CGT?

I do understand that shares with a decent divedent are at a premium.....

BUT... cash on cash I estimate my return ot 1-3% each MONTH not pa.

note I don't plan on spending the dividend $$ (as posted above) but rather leaving the dividend $$ into the holding.

Thanks
Silly??

 

You buy shares @ $100.00 . You sell at $200.00 You have made $100.00 profit. You add all your profits and pay CGT every year.





Johny.

 

Yes I understand that.... buy I seriously doubt with my plan of buying and selling in a max 4-8 week period my holding will appreciate by any serious amount And even if they did BONUS!!!! It just adds to my portfolio.

I still only want to withdraw my original 10K to "play"with the next stock.

Thanks for tolerating me

Silly

 

"BUT... cash on cash I estimate my return ot 1-3% each MONTH not pa."

How have you worked this out?





Johny.

 

Based on recent bank shares that I hold

stock price/share dividend % Return
nab 24 0.73 3.04
cba 49 1.15 2.35
boq 11 0.26 2.36

Looking at the dividend prices on ASX I can choose the stocks that have paid at least 3% on the last payout...

Buy in just before they are due to pay...collect...and cash out... (Leave the profit in the stock to hold)

Remember I am building

Silly?

 

There are Three variables with stock pricing. Market forces, Sector forces and Company forces. All 3 are going up and down. If the market forces are static, and the sector forces(say financials) are static, that leaves the individual company pricing. Before a dividend is issued, the price rises and afterward the price drops. You might make some money and you might not.

Are you sure you don't want use Ubank with its 6.51%?






Johny.

 

Probably ubank/ing is the best bet yes

I think I will research and learn some more and leave my $$ in ING for now.

Thanks for puting up with me

Silly

 

I believe that share/bond pricing's are random, and that nobody can predict the future. So I invest in a device called an index fund. All it does, is track the market that the indice is following. It is simple and cheap. Not sexy. You can't brag about it, down the pub. But it works for me.






Johny.

 

Stock prices tend to drop by pretty much the value of the dividend.

For example, take a theoretical $1 stock paying a $0.03 dividend. Price of the stock the day before it goes ex-dividend would be $1.03. The day after it goes ex-dividend would be $1.00. Over the six months to the next dividend it would slowly build back up to $1.03.

Obviously the day-to-day fluctuations tend to over-ride this so it's not all a straight smooth line.

In practical terms, the drop after going ex-dividend is sharp, accurate and pronounced. The build-back, on the other hand, tends to happen far more rapidly than theory would dictate. In other words, theory dictates that it should take six months to add back the three cents, and that it would do so at the rate of one cent every two months. In practice, the entire value of the dividend is frequently added back within a month or two. So there may well be an opportunity there.

But these are not dependable things. The normal ebb and flow of the market will way out-weigh the dividend cum- and ex-. If you follow your idea, be prepared that you may not be able to make a clean getaway after the dividend, and your choice will be to sell at a loss (that may be much larger than the amount of the div), or to stay invested in that stock.

 

Hi,

What you're talking is dividend stripping where you urchase shares purely for the purpose of gaining a dividend. Be careful about this as you'll find that others play the same game and the price of shaes may increase as the dividend record date nears, and then will drop the day after the rcord date usually by the amount of the dividend payout (as the shares are no longer "worth" that additional amount).

The other point to note is taxation on dividends, I'll quote the ATO website here:

If within 45 days of buying the shares (90 days for certain preference shares), you either sold them or entered into an arrangement to reduce the risk of making a loss on them, you may not be entitled to claim the franking credits. Additionally, if you were under an obligation to make, or were likely to make, a related payment, you may not be entitled to claim the franking credits. See Holding period rule and Related payments rule in Special circumstances and glossary for more information.

 

Silly,

I don't think you understood Johnny's reference to the share price having dividends built in.

What this means is that when a share pays a 3% dividend, the share price *drops* by 3%. So in your example, if you bought 10k worth of a share just before the dividend date you get paid the 3% dividend ($300), but the value of your capital will drop to $9700.

Note this is simplifying it a little, but you get the general idea.

Regards,

Jason