All things STOCKS

[Ernest T. Vol]

Thunder, Why don’t people just jump from company to company to company just racking up the dividends? Seems like if you work the circuit hard, could make 40%

The price is mechanically adjusted for the dividend on the ex-div date.

 

[mrorange211]

The market can stay irrational longer than you can bet against it. Not saying your wrong but I've learned this lesson the hard way.

 

[Go aeiou]

Let's say you bought Target at $100 on July 1st. They declare they will pay a $1 dividend for shareholders as of close of business on July 2nd. The stock, absent any other news will drop to $99 on July 3....

I thought it was after the record date. Drops on ex-dividend date which will be before the actual payment of the dividend.
Your example doesn't have a stated ex-dividend date. Does that happen these days?

I'm trying too sell USB today. It has a dividend payable July 15. The ex-dividend date is June 30.

 

[BigOrangeMojo]

I thought it was after the record date. Drops on ex-dividend date which will be before the actual payment of the dividend.
Your example doesn't have a stated ex-dividend date. Does that happen these days?

I'm trying too sell USB today. It has a dividend payable July 15. The ex-dividend date is June 30.

July 3 would be the ex dividend date in my example since its first day you can buy stock without the $1 dividend...

I know TGO will be in here with a lengthy and detailed explanation later on. I just wanted to show you can't game the market by hopping from dividend to dividend

 

[Jax_Vol]

I thought it was after the record date. Drops on ex-dividend date which will be before the actual payment of the dividend.
Your example doesn't have a stated ex-dividend date. Does that happen these days?

I'm trying too sell USB today. It has a dividend payable July 15. The ex-dividend date is June 30.

Think I get the idea...so works like a split.

The dates for my example are if you own on June 30; payable on July 14 I think.

Sorry for such a dumb question. I was drawing a blank on the logistics.

I've received a few dividends over the years. But, never tried to trade based on whether there is a dividend or not.

 

[Thunder Good-Oil]

Thunder, Why don’t people just jump from company to company to company just racking up the dividends? Seems like if you work the circuit hard, could make 40%

Some do trade on the timing of dividends. Algorithmic trading uses all of the variables. Thinly traded shares would be more volatile. Share prices bounce around when dividend hikes are announced. But that’s because the company is indicating that they’re expecting to be more profitable. Share prices usually have a short term spike when stock splits are announced even though the total value of the company is exactly the same.

The math of share prices theoretically adjusts as soon as the stock goes ex-dividend. Shares are valued by the revenues, expenses, and the present value of expected earnings but also what is on the balance sheet. When dividends are committed the liabilities increase (dividends payable) and once paid the cash on the balance sheet is reduced.

 

[Thunder Good-Oil]

Shares increase in value when a dividend is coming but that is offset because the company will have less cash. Taking away a regular dividend can crash a stock price since it indicates management is signaling they need the cash. Also funds that are focused on fixed income will buy more when dividends are increased and sell when dividends are cut. Long term investors like slow and steady increases to dividends.

Share prices move much more on things other than the mechanics of regular dividend declarations and payments.

 

[Firebirdparts]

Question: Who's going to buy those Fed bonds at the lower rates? And why? Assuming a 1-2% cut. For Example: A good quality Austrailian Bond is currently around 4.1% for a 10 year. I think other good quality foreign bonds are out there as well. I'm just saying foreign bonds may become an alternative to US bonds in that rate environment. Thoughts.....

Don't worry. The bond buyers will pay what they want. It's an auction. It's a common misconception that the Fed can control interest rates for the treasury. If they buy the bonds themselves, then of course they can do anything, but they have been selling bonds for several years. Need to get rid of some more.

The only interest rate that the fed sets directly is the rate they lend to banks.

 

[Jax_Vol]

Shares increase in value when a dividend is coming but that is offset because the company will have less cash. Taking away a regular dividend can crash a stock price since it indicates management is signaling they need the cash. Also funds that are focused on fixed income will buy more when dividends are increased and sell when dividends are cut. Long term investors like slow and steady increases to dividends.

Share prices move much more on things other than the mechanics of regular dividend declarations and payments.

Know Buffett loves them so guessing there is a tax angle. Why do companies pay regular dividends? Obviously, I am naive here.

 

[Thunder Good-Oil]

Know Buffett loves them so guessing there is a tax angle. Why do companies pay regular dividends? Obviously, I am naive here.

I don’t think that Buffett gets a big tax advantage with the dividends he receives. As an individual he gets taxed twice on the dividends he receives. I think he does get to exclude from income 50% of dividends that Berkshire receives as long as BHI owns less than 20% of the dividend paying company’s stock.

He likes dividends because he gets to use that cash. Interestingly though he doesn’t pay dividends out of BHI to those shareholders.

Companies pay dividends because it is how corporations return profits to shareholders. But because of the double taxation it isn’t tax efficient. However many people and institutions own stock in order to receive the dividend income. Even though the paying corporation (generally) isn’t allowed to deduct dividend payments against their taxes and the individuals receiving the dividends must (generally) include them as taxable income. Therefore there’s the double taxation element of the equation.

REITs are required to pay out 90% of their earnings as dividends. They are allowed to avoid paying taxes on their earnings that generated the dividends and their earnings pass through to their shareholders.

Companies might decide that it’s better to use the cash that they generate for other things. They can use the cash to grow the business by purchasing equipment or hiring more employees. They can pay down debt. They can buy back their own stock. They can give bonuses to employees. They can pay dividends with the cash. BUT earnings will have to cover the dividends paid to sustain them. Without the earnings companies will eventually not have the funds to pay dividends. Which is why investors need to look at the dividend payout ratio along with the dividend yield. Earnings per share must exceed the dividends paid per share or eventually the company will run out of money.

Corporations can use their cash to buy other companies. They can buy back their own shares of stock (which democrats oppose). Share buybacks are now taxed by the federal government (thanks to Biden’s Inflation Reduction Act). It’s only 1% (for now) and there are some exclusions included in the tax code when it’s under a certain amount or used to fund employee retirement plans. However the 1% excise tax is also NOT deductible as an expense to the company repurchasing their own stock.

So individuals should consider keeping dividend paying stocks in their retirement accounts and stocks with little or no dividends in their taxable accounts. Roth’s avoid the double taxation entirely. Regular IRAs and 401(k) accounts defer the tax on the dividends received.

 

[Jax_Vol]

I don’t think that Buffett gets a big tax advantage with the dividends he receives. As an individual he gets taxed twice on the dividends he receives. I think he does get to exclude from income 50% of dividends that Berkshire receives as long as BHI owns less than 20% of the dividend paying company’s stock.

He likes dividends because he gets to use that cash. Interestingly though he doesn’t pay dividends out of BHI to those shareholders.

Companies pay dividends because it is how corporations return profits to shareholders. But because of the double taxation it isn’t tax efficient. However many people and institutions own stock in order to receive the dividend income. Even though the paying corporation (generally) isn’t allowed to deduct dividend payments against their taxes and the individuals receiving the dividends must (generally) include them as taxable income. Therefore there’s the double taxation element of the equation.

REITs are required to pay out 90% of their earnings as dividends. They are allowed to avoid paying taxes on their earnings that generated the dividends and their earnings pass through to their shareholders.

Companies might decide that it’s better to use the cash that they generate for other things. They can use the cash to grow the business by purchasing equipment or hiring more employees. They can pay down debt. They can buy back their own stock. They can give bonuses to employees. They can pay dividends with the cash. BUT earnings will have to cover the dividends paid to sustain them. Without the earnings companies will eventually not have the funds to pay dividends. Which is why investors need to look at the dividend payout ratio along with the dividend yield. Earnings per share must exceed the dividends paid per share or eventually the company will run out of money.

Corporations can use their cash to buy other companies. They can buy back their own shares of stock (which democrats oppose). Share buybacks are now taxed by the federal government (thanks to Biden’s Inflation Reduction Act). It’s only 1% (for now) and there are some exclusions included in the tax code when it’s under a certain amount or used to fund employee retirement plans. However the 1% excise tax is also NOT deductible as an expense to the company repurchasing their own stock.

So individuals should consider keeping dividend paying stocks in their retirement accounts and stocks with little or no dividends in their taxable accounts. Roth’s avoid the double taxation entirely. Regular IRAs and 401(k) accounts defer the tax on the dividends received.

Thanks Thunder!! That is extremely helpful. Murphy’s Law..I have ended up with majority of my dividend paying company in my regular brokage account. Have little in 401k. Got it backwards as usual.

 

[Go aeiou]

Thanks Thunder!! That is extremely helpful. Murphy’s Law..I have ended up with majority of my dividend paying company in my regular brokage account. Have little in 401k. Got it backwards as usually.

There are some ETFs that hold stocks that have a history of increasing dividends.
You can also search "stocks that have increased dividends for XX consecutive years". Usually XX would be 10 or 25 years.
VIG is the etf I own. VDIGX. Both Vanguard.
You might also read about "qualified dividends" vs. "ordinary dividends".
Sorry if TMI.

 

[Jax_Vol]

There are some ETFs that hold stocks that have a history of increasing dividends.
You can also search "stocks that have increased dividends for XX consecutive years". Usually XX would be 10 or 25 years.
VIG is the etf I own. VDIGX. Both Vanguard.
You might also read about "qualified dividends" vs. "ordinary dividends".
Sorry if TMI.

No such thing as TMI with me regarding dividends. That is a whole new area for me. I'm obviously clueless.

For this CDP stock I bought, tomorrow is the date you must own by: Let's say I have 1000 shares.

I hope thru tomorrow to get dividend of .035/share
On Tuesday, I sell 500 shares
On July 14, will they still pay me the .035 dividend for the full 1000 shares?

Yes, I need to research ordinary vs qualified dividends.

 

[Thunder Good-Oil]

No such thing as TMI with me regarding dividends. That is a whole new area for me. I'm obviously clueless.

For this CDP stock I bought, tomorrow is the date you must own by: Let's say I have 1000 shares.

I hope thru tomorrow to get dividend of .035/share
On Tuesday, I sell 500 shares
On July 14, will they still pay me the .035 dividend for the full 1000 shares?

Yes, I need to research ordinary vs qualified dividends.

There are several relevant dates. Ex-dividend is when the stock first trades without receiving the dividend. So all other things being equal, share prices will fall by the amount of the dividend/share.

From Google AI:

Dividend dates determine when shareholders are eligible to receive dividend payments. There are four key dates: the declaration date, the ex-dividend date, the record date, and the payment date. The declaration date is when the company announces the dividend. The ex-dividend date is the cutoff for receiving the dividend, typically one business day before the record date. The record date is when the company identifies shareholders of record. Finally, the payment date is when the dividend is actually paid out.
Here's a more detailed explanation:

Declaration Date:
This is the date when the company's board of directors formally announces the dividend, including the amount per share and the subsequent dates.

Ex-Dividend Date:
This date is crucial for determining who receives the dividend. If you purchase shares on or after the ex-dividend date, you will not receive the upcoming dividend payment. The ex-dividend date is usually one business day before the record date.

Record Date:
The record date is the date on which the company checks its records to identify shareholders who will receive the dividend. To be eligible, you must be a registered shareholder on this date.

Payment Date:
This is the date when the dividend is actually distributed to eligible shareholders. It can be a few weeks after the record date.

 

[Go aeiou]

No such thing as TMI with me regarding dividends. That is a whole new area for me. I'm obviously clueless.

For this CDP stock I bought, tomorrow is the date you must own by: Let's say I have 1000 shares.

I hope thru tomorrow to get dividend of .035/share
On Tuesday, I sell 500 shares
On July 14, will they still pay me the .035 dividend for the full 1000 shares?

Yes, I need to research ordinary vs qualified dividends.

Tomorrow is the ex-dividend date?
If you like CDP why sell? REITs tend to be fairly safe. Has the price risen? Or Bad news?

OTOH, if you don't need the dividend you might look at stocks that pay little or no dividend. BRK B is the classic example.
You are counting on the price of the stock going up and paying Capital gains rate on the increase when you sell.. Often a lower rate, and you don't pay income tax on the divdends.
EDIT:
(What I mean is BRK B does not pay dividends. They let the book value, and hopefully the price of their stock grow.)

 

[Thunder Good-Oil]

CDP is ex-dividend on June 30. So the shares will fall in value by $0.305 in Monday’s session (plus or minus share price changes due to other reasons). On the declaration date the company’s dividends payable account on their balance sheet is credited (increased) and retained earnings in the equity section is debited (decreased). The pay date is July 16th, so everybody that owned shares at the 6/27 close will receive the $0.305/share dividend soon after 7/16. It will take a few days for the dividend to be credited to the investors account. On 7/16 CDP pays the dividends (dividends payable is debited and cash is credited) to the Depository Trust Company which then forwards the funds to the brokers. Then the brokers credit the investors accounts.

 

[Thunder Good-Oil]

Dividends that “qualify” as qualified dividends have a lower tax rate than ordinary dividends. Generally the IRS rule is that the underlying shares of stock must be owned for at least 60 days in the 121 day window that begins 60 days before the ex-dividend date and through the 60 days after ex.

I wonder how qualified versus ordinary is kept up with when the tax year ends before the window closes.

Edit: it appears that brokers won’t issue the form 1099-DIV until late February so that they are able to determine if late in the year dividend payments are qualified or not.

 

[Jax_Vol]

Tomorrow is the ex-dividend date?
If you like CDP why sell? REITs tend to be fairly safe. Has the price risen? Or Bad news?

OTOH, if you don't need the dividend you might look at stocks that pay little or no dividend. BRK B is the classic example.
You are counting on the price of the stock going up and paying Capital gains rate on the increase when you sell.. Often a lower rate, and you don't pay income tax on the divdends.

I like CDP very much. However, it has been up and down. Actually, performing quite poorly since President Trump entered office.

I'm bought on a lot of down days and now have far more invested in them than I intended. (was just using 1000 share number as easy example).

Thanks to you and Thunder for the good insights. Let me ponder for a couple of days.

 

[Thunder Good-Oil]

No such thing as TMI with me regarding dividends. That is a whole new area for me. I'm obviously clueless.

For this CDP stock I bought, tomorrow is the date you must own by: Let's say I have 1000 shares.

I hope thru tomorrow to get dividend of .035/share
On Tuesday, I sell 500 shares
On July 14, will they still pay me the .035 dividend for the full 1000 shares?

Yes, I need to research ordinary vs qualified dividends.

Friday was the day that you needed to own the shares in order to get the dividend. The rights to the dividend are gone on the ex-dividend date which is tomorrow. You could sell your shares tomorrow and you’ll still receive the dividend later in July.

 

[Jax_Vol]

Friday was the day that you needed to own the shares in order to get the dividend. The rights to the dividend are gone on the ex-dividend date which is tomorrow. You could sell your shares tomorrow and you’ll still receive the dividend later in July.

Oh, you looked it up for me? Great, thank you Thunder.

In that case, I may go ahead and unload a bit. Collected more of that stock than I ready wanted.

 

[Thunder Good-Oil]

Oh, you looked it up for me? Great, thank you Thunder.

In that case, I may go ahead and unload a bit. Collected more of that stock than I ready wanted.

Check my work to be sure. But that’s what I’ve found. Ex-dividend on 6/30 and $0.305/share. It would be worth verifying by calling the broker.

 

[Jax_Vol]

Check my work to be sure. But that’s what I’ve found. Ex-dividend on 6/30 and $0.305/share. It would be worth verifying by calling the broker.

Looks to me like you are correct Thunder.

Therefore, with dividend off table, is it safe to assume there will be considerable selling pressure today?

Trading based on dividend timing is a whole new bag of tricks for me. Do realize it makes no difference for people who are long term investing. The majority of big money would be buy and hold folks.

 

[Thunder Good-Oil]

Looks to me like you are correct Thunder.

Therefore, with dividend off table, is it safe to assume there will be considerable selling pressure today?

Trading based on dividend timing is a whole new bag of tricks for me. Do realize it makes no difference for people who are long term investing. The majority of big money would be buy and hold folks.

Short, holiday week with a long weekend coming up. But there’s also FOMO.

I’m thinking that Adobe (ADBE) is a buying opportunity right now.

I don’t bother trying to outsmart the algorithms that trade the dividend timing. I trust them to find inefficiencies in markets and create a good price. However they also trade momentum which tends to have stock prices overshoot the upsides and downsides. Especially with smaller cap, thinly traded names. Kind of a conundrum for traders.

 

[Thunder Good-Oil]

On CNBC Karen Finerman said that she favors the financial, industrial, and tech sectors right now. She’s moving away from cash.

She has a nice résumé. Plus her husband is worth over $3 billion. Lawrence Golub.

 

[Jax_Vol]

Short, holiday week with a long weekend coming up. But there’s also FOMO.

I’m thinking that Adobe (ADBE) is a buying opportunity right now.

I don’t bother trying to outsmart the algorithms that trade the dividend timing. I trust them to find inefficiencies in markets and create a good price. However they also trade momentum which tends to have stock prices overshoot the upsides and downsides. Especially with smaller cap, thinly traded names. Kind of a conundrum for traders.

Yeah,,,it briefly dropped. Now starting to go back positive.

I'm returning to my prior stance of not understanding dividends and just buying what I consider good companies.

ADBE is such a strong group. Unsure if competition is sneaking up on them.