Share holdings and Dividends

[S6PNJ]

Here's what will probably be a quick question to answer.

I currently have some PRU shares and have just received the following:

Pru Share email said:

2011 final dividend

The timetable for the 2011 final dividend is as follows:

13 March 2012 Announcement of 2011 final dividend
28 March 2012 Ordinary shares quoted ex-dividend
30 March 2012 Record date for the 2011 final dividend
2 May 2012 Last Date for DRIP elections
24 May 2012 Dividend payment date
30 May 2012 Despatch of share certificates for shareholders participating in the DRIP

If I wanted to buy more shares, just to get the dividend, when would I need to buy them by and how long would I need to hold them? I have some money I could flex into these shares (or others) but I wouldn't want to risk leaving it there for any period of time.

[CaptainSensib1e]

In theory, you could buy on the 27th, and sell on the 28th, and receive the dividend. Would be fairly pointless though as the price will usually drop by an amount equivalent to the dividend when the stock goes xd.

[raptor600]

That would be possibly the most pointless exercise you could carry out.

The share price will drop in line with the dividend the following morning so the net effect is 0.

If it was that easy do you not think everyone would do it?

[S6PNJ]

Raptor, I assume you are talking about Cap Sensible there?

I asked when it would be best to buy them by, so going on what Cap sensible said, I'd need to buy them a few days/weeks/months before the "quoted ex dividend" date and then sell them some time after that same date. The question arises (now that I know which date I should be looking at) as to how far in advance and how far afterwards. My initial query came about as I didn't know which date you had to own the shares by in order to qualify for the resulting dividend.

Clearly if there were a formula we'd all be millionaires by now, but I'm just wondering if there is any rough guidance?

[raptor600]

OP I was referring to you.

If a share is £10 and pays a 50p dividend the share the next day will be £9.50 (all other things being equal).

After stamp duty and dealing fees you are just going to lose money in the short term doing this.

[sideways sid]

There is also tax to consider.

The only possible way to benefit from your idea would be some kind of tax arbitrage whereby the net dividend is worth more to you or your trading vehicle than the gross capital loss incurred when the share goes xd.

I can't imagine any circumstances where you could benefit from this in isolation though.

As others have said, the guidance is don't do it!

[S6PNJ]

Before I get any more - 'can't be done' type posts, may I emphasis a small point please?

S6PNJ said:

I'd need to buy them a few days/weeks/months before the "quoted ex dividend" date and then sell them some time after that same date. The question arises as to how far in advance and how far afterwards.

I (now) appreciate that the share price will rise and fall close to the divi date, but if the advice was ALWAYS don't do it, people wouldn't worry about dividends and would just buy and sell depending on price. Dividends are clearly a sought after entity which is why share sites quote the p/e ratio.

I also realise I can easily look back at the share price around the divi dates for about the last 5 years or so, I was just wondering what other people's take on it was.

[raptor600]

S6PNJ said:

Before I get any more - 'can't be done' type posts, may I emphasis a small point please?

S6PNJ said:

I'd need to buy them a few days/weeks/months before the "quoted ex dividend" date and then sell them some time after that same date. The question arises as to how far in advance and how far afterwards.

I (now) appreciate that the share price will rise and fall close to the divi date, but if the advice was ALWAYS don't do it, people wouldn't worry about dividends and would just buy and sell depending on price. Dividends are clearly a sought after entity which is why share sites quote the p/e ratio.

I also realise I can easily look back at the share price around the divi dates for about the last 5 years or so, I was just wondering what other people's take on it was.

What has the P/E ratio got to do with anything?

Your argument is flawed because you are buying SOLELY to get the dividend. You invest in a company because you think it's shares are undervalued or will rise in the future.

An investor will not invest based on when the dividend will be paid as this is always factored in to the price (the closer to ex Div date the higher the price and then it falls just after).

Again - if this was a fool proof way of making money everyone would be doing it - it isn't and won't work 50% of the time.

[CaptainSensib1e]

S6PNJ - by all means try what you are suggesting, but you will realise pretty quickly that timing purchases/sales around the xd date will net you absoltely zero benefit. In fact you will just up chucking away a load of money on spreads and dealing fees.

[S6PNJ]

Thanks folks, I'll consider my idea rubbish as you have suggested and work out other ways to make my millions. All advice gratefully received by the way, I'm not rubbishing it.
/thread