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Ex-dividend purchases?

Wider investment strategy discussions not dealt with elsewhere
Itsallaguess
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Re: Ex-dividend purchases?

#123270

Postby Itsallaguess » March 8th, 2018, 6:50 pm

eepee wrote:
Out of the 28 shares, 8 reduced in price by more than the dividend.

If instead of buying at minimum cost you had invested the full ex-div fund in shares you could have bought 7 at a greater or similar quantity.

Unfortunately Persimmon, as mentioned by others, did tend to rise during the day so did not qualify for consideration.


Given the above, do you think at some point in the future that you'll be able to tell beforehand which ones will reduce their share prices, and which ones will rise?

I'm sorry, but I still maintain that what you're primarily monitoring here is general market movements, and the whole process has little to do with dividends at all....

Cheers,

Itsallaguess

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Re: Ex-dividend purchases?

#123272

Postby tjh290633 » March 8th, 2018, 6:52 pm

I don't recognise many of the EPICs in your list (just LAND and PSN, actually), but it omits the two shares which I hold which went XD today - BLT and S32.

BLT fell by almost exactly the amount of the dividend, while S32 fell by 4%, 1.5% more than it would have done had it just fallen by the value of the dividend (~2.5%).

TJH

eepee
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Re: Ex-dividend purchases?

#124506

Postby eepee » March 13th, 2018, 11:17 am

..... be able to tell beforehand which ones will reduce their share prices .....
I doubt it and neither is it of interest for this study.

I'm sorry, but I still maintain that what you're primarily monitoring here is general market movements .....
Of course you are right but I am not doing this because of interest in them. All I want to study is the resultant price moves around ex-div date. At this stage all I am looking at is the variation change from the dividend. Whether this variation tends to be 'one way' and if so, by how many as a percentage if all ex-divs on that date. Whether the current results merit a future study to see if one can predict the movements, time will tell.

---------------

Both BLT and S32 were eliminated on the basis of none-sterling dividends, as I mentioned in my last. I thought none-sterlings needed to be the first to go. There is little point in getting involved with conversion rates when one is looking at the area around the ex-div date, since the real conversion is usually not declared till near the payment date which may be a few weeks further on.

---------------

Having been away for a few days, I never got the chance to study the results of the first run. I shall hopefully do that this afternoon and report before the next run tomorrow.

-----------------------

Oh no! I have re-read my last post and clicked on the link. Even though the other day it was not showing any ads, it does today - and again saucy! Will someone PLEASE tell me again how to avoid this or suggest an image depository site that does not require registration or jumping through too many hoops? Many thanks.

Regards,
ep

Itsallaguess
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Re: Ex-dividend purchases?

#124529

Postby Itsallaguess » March 13th, 2018, 12:29 pm

eepee wrote:
Will someone PLEASE tell me again how to avoid this or suggest an image depository site that does not require registration or jumping through too many hoops? Many thanks.


Imgur is very widely used on these boards for hosting pictures that you want to either show in your posts, or provide links to in them -

https://imgur.com/upload

Cheers,

Itsallaguess

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Re: Ex-dividend purchases?

#124544

Postby Lootman » March 13th, 2018, 1:20 pm

Your idea isn't new. There are so-called "dividend capture" strategies and at least one US fund is modelled on that idea:

https://seekingalpha.com/article/332759 ... ually-work

http://www.morningstar.com/cover/videoc ... ?id=356587

http://rationalmf.com/funds/rational-di ... ture-fund/

But as others have pointed out, over time it's going to be a zero sum game, or worse given spreads and commissions. You'd be better off doing it with US shares because there is no stamp duty there, but then FX issues will skew the result.

The main reason to do something like this would be tax, i.e. if it makes a big difference to you whether you pay income tax or capital gains tax. Other that any positive return from such a strategy will be down to luck.

As one of the articles indicate, you'd be better off trying this for large special dividends. Otherwise you are going to lose 2% a year just in stamp duty for a quarterly payer. That's swallowing up most of the dividend you are trying to capture!

eepee
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Re: Ex-dividend purchases?

#124567

Postby eepee » March 13th, 2018, 3:57 pm

Many thanks for the Imgur link - much appreciated. It looks pretty 'loop-less' and thus my type of site. I have no intention of continuing this thread beyond other's interest. However I will post a screen-shot on Thursday as a means of testing the link.

Thanks for the links. It is reassuring to know that others have thought broadly along similar lines.


Tentative conclusions after first trial.

If buying shares for the dividend, whether pre or post ex-div date, the best time is around midday. Prices seem to be more depressed around then. Thus you will pay less for a number of shares or get a greater quantity if you had a fixed fund amount in mind.

The greatest difference between pre and post prices occurs if on the pre ex-div date the price is taken early in the trading day. After 4pm seems to be second best. This does suprise me. With day traders closing their positions, I would have thought that prices would be seriously depressed.


And so to tomorrow

Haven't been able to do much analysis through time constraints. So this next run will be very much as before.

However one thing is clear and I shall do the adjustment shortly - I need to increase the number of lines the program caters for so as to include all stocks coming ex-div, apart from none-sterlings.

Depending on the results I may need to do a study of those whose names have words such as 'Funds', 'Trusts', 'Investments' even if quoted on the dividenddata page, to understand if they 'have a sting'. In all innocence, a couple of years ago, I bought some REIT shares and discovered the sting on payment date! I do understand that there are various types of fund holdings but I have never looked at them in any detail.

Regards,
ep

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Re: Ex-dividend purchases?

#124570

Postby swill453 » March 13th, 2018, 4:05 pm

eepee wrote:If buying shares for the dividend, whether pre or post ex-div date, the best time is around midday. Prices seem to be more depressed around then. Thus you will pay less for a number of shares or get a greater quantity if you had a fixed fund amount in mind.

I really can't believe that is the case. There is so much automated trading going on that if that was a genuine pattern, it would be immediately taken advantage of, to the point where the advantage would vanish.

Scott.

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Re: Ex-dividend purchases?

#124581

Postby Lootman » March 13th, 2018, 4:41 pm

eepee wrote: I may need to do a study of those whose names have words such as 'Funds', 'Trusts', 'Investments' even if quoted on the dividenddata page, to understand if they 'have a sting'. In all innocence, a couple of years ago, I bought some REIT shares and discovered the sting on payment date! I do understand that there are various types of fund holdings but I have never looked at them in any detail.

If I was going to try this strategy I would pick an exchange-traded fund as they don't have stamp duty and, at least for the main ones, the spreads are very tight. If you can find a higher yielding ETF that ideally pays a dividend just once a year, then your frictional costs will be minimised.

For a quarterly-paying UK share there is no way that any edge you get from this would exceed your costs of trading in and out four times a year, which would suck over 2% annually out of your returns.

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Re: Ex-dividend purchases?

#124656

Postby hiriskpaul » March 13th, 2018, 9:29 pm

Lootman wrote:
eepee wrote: I may need to do a study of those whose names have words such as 'Funds', 'Trusts', 'Investments' even if quoted on the dividenddata page, to understand if they 'have a sting'. In all innocence, a couple of years ago, I bought some REIT shares and discovered the sting on payment date! I do understand that there are various types of fund holdings but I have never looked at them in any detail.

If I was going to try this strategy I would pick an exchange-traded fund as they don't have stamp duty and, at least for the main ones, the spreads are very tight. If you can find a higher yielding ETF that ideally pays a dividend just once a year, then your frictional costs will be minimised.

For a quarterly-paying UK share there is no way that any edge you get from this would exceed your costs of trading in and out four times a year, which would suck over 2% annually out of your returns.

Yes, ETFs provide good prospects for rolling dividends into capital gains if someone wants to do that as you can sell one ETF about to go ex-div and immediately buy another tracking the same, or similar index, then trade back at a later time, but inside the 30 day rule. For example, the iShares core series ETFs are accumulating, but UK reporting, so holders are liable for income tax on rolled up income if they hold at the end of February. However, if you sell on the day before end of month, buying a similar Vanguard ETF (or another similar iShares ETF), then swap back again on the first working day of March, no income tax will become due. Instead there may be a small net capital gains tax liability created from buying and selling each ETF. The repurchase of the iShares ETF is matched against the previous sell (30 day rule) and the Vanguard sell matched against the previous buy. This can be used to crystallise a larger gain or loss as well by trading each side more than 30 days apart, but that carries the risk of the capital gain/loss being made on the ETF that is held for a brief period, unless it can be held in a tax shelter or via a spread bet.

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Re: Ex-dividend purchases?

#125124

Postby Pastcaring » March 15th, 2018, 1:37 pm

Hi eepee.

I should probably keep quiet but a strategy for dividends here is to short the company .

I don't know if you can do this in the uk but for Perssimon if the dividend is 111p and it falls by 100p then the naked short would work thus,borrow 1000 shares ,sell them today,say they are 10 quid each ,sell them for 10000 quid .They are cum divi so the owner still gets the divi plus the cost of the option

They go XD tomorrow.They fall by the 100p and you buy them back for 9000 quid to deliver back to the owner,in Australia a pension fund.

Thus an overnight profit of 1000 quid minus cost of option and brokerage and any other costs ( tax etc ).

I have no idea if naked short selling can be done in the UK but there you go.Down here an options broker must be used as a normal broker would lose his licence for doing such things,classed as not qualified.

Another divi strategy is to ramp up returns by picking up 3 dividends in a year, if they are 6 monthly. Thus buy Perssimon today,pick up the 111 p divi,another one is 6 months,another one 6 months after that,take any price gain as a bonus. Of course the price can fall over that year,if it does then let' s hope the stock is a good long term hold for income.Of course 3 naked short sales over the year can produce a huge return .

The ASX is different to the UK,the info may be useful,or it may be useless,I don't know,but it may be something to think about.

Good luck.

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Re: Ex-dividend purchases?

#125145

Postby GoSeigen » March 15th, 2018, 2:48 pm

Pastcaring wrote:Hi eepee.

I should probably keep quiet but a strategy for dividends here is to short the company .


I hope you're sensible enough not to try this ep. If you are short a stock you are liable for the dividend and any other income or corporate actions which the buyer is entitled to.

GS

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Re: Ex-dividend purchases?

#125151

Postby Lootman » March 15th, 2018, 3:06 pm

GoSeigen wrote:
Pastcaring wrote:Hi eepee.
I should probably keep quiet but a strategy for dividends here is to short the company .

I hope you're sensible enough not to try this ep. If you are short a stock you are liable for the dividend and any other income or corporate actions which the buyer is entitled to.

Yes, if it were that easy then people would simply buy put options the day before XD and then close the position out the following day.

In practice options premia have expected dividends baked into their price, just like the share price itself. There is no free, easy lunch.

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Re: Ex-dividend purchases?

#125347

Postby eepee » March 16th, 2018, 12:25 pm

Here is what happened 14th/15th.

Eight tests run to find out if certain times are favoured and cross-checked between the two dates.

43 dividends indicated by dividenddata. I don't think any were rejected because they were none-sterling. But short of counting them on the site I cannot be sure. I had expanded the program to take up to 50 items.

The number of shares with price drops greater than the dividend (targets) ranged from 13 (30%) to 23 (53%).

The available number of targets did broadly follow the FTSE100 on the 15th with its dip at about 1 to 2 pm

The highest prices are early in the morning. This is of no interest for my study since ideally I am looking for the opposite.

The lowest prices are yet again around midday.

No recovery on target shares has been observed on the results of the previous week.


TENTATIVE CONCLUSIONS

Not worth doing loads of test runs at different times on the day because of the minimal difference between times.

On any post ex-div date, there seem to be quite a number of targets. Consider just these. The only reason for trapping the pre ex-div data is in order to establish how many shares the allocated fund will buy.

Once again midday seems to be the best time in which to purchase. As swill453 pointed out, it is difficult to believe because one would think that the automated systems would have noted the fact. Although I still mark the conclusions as 'tentative', with 12 tests over the two weeks and with all cross-checked times, it is amazingly consistent. Looks like the automated systems are playing a different game. For example, if they were shorting shares, they would want the prices to be as high as possible.


Here are the two images of the run:-
https://imgur.com/a/5JldG
Thanks again to Itsallaguess for the link. It is very easy to use and I'll find out how well it works when I post this. Incidentally I couldn't see a way of editing a post otherwise I would change the link to that previous one. Presumably the "Sexy Women In Newcastle-under-Lyme" becomes the "Sexy Women In WhereverYouAre"? Otherwise, I had no idea we were the national centre for certain things! Sheltered life I guess!

Regards,
ep

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Re: Ex-dividend purchases?

#125587

Postby Pastcaring » March 17th, 2018, 11:42 am

Hi GS

You have correctly described a fail to deliver event.This is impossible for the strategy I gave.

The strategy is very highly regulated and done through third parties as described.

You are in the short for 24 hrs only.Regulations are very strict!!.

The third party sells the share at say the 10 quid I said.Both orders go in at the same time,sell 17/3 at 10 quid, buy18/3 at 9 quid.

Rules change,they were 72 hrs maximum then failure to deliver begins.We are now on a T + 2 basis here so it may now be 48 hrs max,when it was 72 hrs we were T + 3.

I always keep to 1 day,it is fairly common,there are limitations to the number of shares that can be borrowed,sometimes you can't get them.

Win win for both parties,the pension fund that lends the shares out gets the divi, 110p plus rent for the overnight say 100 quid.Total 120p,they WILL get delivery of the shares,the order is in the system..If I died overnight the order would still go through,thus the third party..

Estimates are this adds around 0.3% to the yield the pension fund gets over the course of a year.I have no idea how accurate that is.I have no idea if the UK exchange offers this facility.As said ,cannot do this through a normal broker.

Basically it is a cross trade through a third party qualified to do it.

The short sale is as I would expect,the stock fell by the divi amount.The whole purpose of a short sale.I sell in the expectation I can buy it back at a lower price in the future.The future being next day.

A bank here MQG results come on 4 may,I am expecting $2.80 per share final divi.Goes XD on 14 may.The stock is $105 at the moment,it should rise on the lead up as people chase the divi.Leave that to one side,say it stays the same,13 may I sell at $105 ,14 may I buy back for delivery at $103,I'm taking $2per share.Sometimes they don' fall by the full divi ,sometimes they fall more.I think I am safe by not being greedy and only taking 2 bucks,in case it doesn't fall by the full amount.

MQG. Macquarie group,an investment bank I have held for a long time,very volatile stock,possibly not a good example but there you go.

Check the chart for 10 years,from $80 down to around $17,then back up to $105 now,record highs.An eleven year chart would give $95 down to $17.I was in before that at around $60,never did I dream it would go down 17.At 17 never would I dream it would be back up to $105 8 years later.

eepee
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Re: Ex-dividend purchases?

#125907

Postby eepee » March 19th, 2018, 9:41 am

I would say that, as far as clarifying my ideas this thread is probably exhausted.

If anybody wants to discuss the progress of the excercise further, by all means contact me. Indeed if you want a copy of the software, you are welcome to one. Not quite held together with string and chewing gum but it has only been run on Win7 and thus not optimised for other Win versions. Should work, although the displayed data may not be as good due to MS's wonderful history of mending what is not broken,

Given a spectrum of, from 'diligent research' to 'sticking pins in a shares table', it is true to say that most of the postings have tended towards the former whereas my study is more at the sticking pins end. My fault - I still believe that I did not explain the simplicity of what I wanted to do clearly enough.

That is not to say that I did not find the thread useful. At every key posting I checked to see if there was any need to adjust my view and it did happen. I ended with the reassurance that the study is worth persuing because it might lead to a few bob from unallocated funds, bit of entertainment, a simple challenge requiring little research,

Because of the postings, there has been a need to calculate and recalculate various scenarios. This has led to what is to my mind, an important conclusion - that when buying shares for the dividend around ex-div date, regardless of whether they are meant to be held in the long or short-term, there is an advantage to buy them post ex-div, ideally on the ex-div day itself.

I will of course, still look at this thread but I no longer need it to clarify my idea of the model under test.

Thanks to you all.

Regards,
ep

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Re: Ex-dividend purchases?

#125916

Postby Itsallaguess » March 19th, 2018, 10:02 am

eepee wrote:
Because of the postings, there has been a need to calculate and recalculate various scenarios.

This has led to what is to my mind, an important conclusion - that when buying shares for the dividend around ex-div date, regardless of whether they are meant to be held in the long or short-term, there is an advantage to buy them post ex-div, ideally on the ex-div day itself.


I've got to say that I'm not convinced with the above conclusion.

I think it might be the case over relatively short periods and during certain market conditions, but I'd be wary of taking the above as any sort of conclusion that can be used at any time.

As others have repeatedly suggested, if there really was any demonstrable and repeatable advantage to be gained by such a conclusion, it would be arbitraged away by investors wanting to take advantage of it, so I can only conclude that you've seen some short-term data that hints towards such an advantage, but that any advantage is more to do with market conditions during the period of testing, rather than any long-term situation (a conclusion...) that might always exist during any market conditions.

Cheers,

Itsallaguess

eepee
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Re: Ex-dividend purchases?

#125960

Postby eepee » March 19th, 2018, 12:13 pm

I've got to say that I'm not convinced with the above conclusion.

If my calculations are correct, there is only one condition in the following scenarios in which a pre ex-div purchase would return more money than a post-purchase. Even so, the chances are that it is a share you MUST have and are thus likely to keep long-term or at least, until full recovery.

Even when results are the same - full recovery or price drop by just the dividend - there is still a very slight advantage post ex-div because of the lower outlay and stamp duty.

Appreciate that these figures are in no way related to the market and thus are not bias by reason of market sentiment etc..


Six scenarios

The fund in all cases is £2000.
The total dividend is assumed to be £100.

1) For shares bought pre ex-div date, full recovery plus dividend is, of course, achieved when the price returns £2000. Higher outlay than post ex-div purchase.

2) For those bought post ex-div it is only when recovery reaches true cost plus dividend that the notional dividend is converted to real cash. The advantage is less outlay, less stamp duty.

3) Say shares are bought pre ex-div. On ex-divi date the price goes down by the dividend plus £20 = £120
A few days later, for whatever reason, you need to sell them and the overall price has risen by £30.
Overall purchase cost is £2000 - dividend = £1900. But the sale generates £2000 - £120 + £30 = £1910
Since divi already cashed, return has been £1910 + £100 = £2010
In other words the gain is £10. One has sacrificed £90 of the dividend because if they had recovered fully one would have £2000 + £100 = £2100.

4) As above but this time the variation is positive. So the price goes down by £100 less £20 = £80
As before, they need selling when the price has risen by £30.
The total cost was again £2000 - £100 = £1900. The sale generates £2000 - £80 + £30 = £1950
Since divi already cashed, return is £1950 + £100 = £2050
The gain is £50 and the sacrificed dividend is also £50.

5) Buying them post ex-dividend (conditions as in 3 above) means that on the nominal £2000 the actual outlay would be
£2000 - £100 - £20 = £1880
The sales income will be £1880 + £30 = £1910
There is no recovery involved thus the return has been a real gain of £30 and a sacrificed dividend of £70.

6) Buying them post ex-dividend with conditions as in 4 above, The actual outlay would be £2000 - £100 + £20 = £1920
The sales income will be £1920 + £30 = £1950
There is no recovery involved thus the return has again been a real gain of £30 and a sacrificed dividend of £70.

Are these calculations correct?

Regards,
ep

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Re: Ex-dividend purchases?

#126007

Postby Lootman » March 19th, 2018, 2:17 pm

eepee wrote:Are these calculations correct?

I have no idea, but I think the problem here is that you are a little too much in love with your idea, and so you tend to give a higher weight to arguments and data that support it than to arguments and data that do not.

As others have said, this ultimately has to be a zero sum game, before costs are taken into account. Any extra purchases and sales that your method causes will entail costs that would not be present for the alternative of simply holding and collecting every dividend.

As an aside, one of the great benefits of having experience in the markets (in my case 30 years, although there are some here with more than that, like TJH) is that I no longer see any need to compile data, conduct tests or write studies in pursuit of any theory that might pop into my head. It is intuitively obvious to me that an approach like yours introduces costs and complexity whilst the underlying idea cannot add long-term value.

Now, if you enjoy building spreadsheets and/or it makes you feel you are being "scientific" and "data-driven" then that is great for you. I just would personally regard it as wasted effort over and above any pleasure you derive from it. Although when you finally come to realise this doesn't work then you will have learned something useful, about yourself if not about the markets.

I don't mean to sound unkind or patronising here in any way. I engaged in similar exercises and research in my early days of investing. But with experience I came to realise that there is no magic solution to beating the market that would be mine if only I worked harder at it. Indeed, I had better results when I stopped working so hard at it, because I then traded less and had lower costs.


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