Dividend shares - Collect or sell..?

[rogue1]

First n00by thread, here.

I hold some dividend paying shares at the moment. Their value is increasing, but as far as I am aware it is common for such shares to increase in value in the lead up to their payout date (Feb/Aug), then plummet immediately after.

In light of this, what are some of the things I should consider when deciding whether to sell the shares at their peak value, or hold on to the shares and collect the dividend?

Thanks in advance for the excellent replies...

 

[jjbinks]

I think it is difficult to predict the best time to sell a single stock irrespective of dividends.

If you need to sell the shares then sell them when you need to and don't worry what happens to the price afterwards.

 

[Smurf1976]

I hold some dividend paying shares at the moment. Their value is increasing, but as far as I am aware it is common for such shares to increase in value in the lead up to their payout date (Feb/Aug), then plummet immediately after.

Firstly, welcome to ASF!

As a broad concept, yes it's true that the value of shares will drop after the dividend but only by an amount roughly equal to the value of that dividend.

So for a simple example:

The shares are worth $10 the day before a 50 cent dividend is paid. For simplicity let's ignore franking credits and just say that the total value of that dividend is 50 cents per share.

Most likely those shares will be worth somewhere around $9.50 each immediately after the dividend. Not exactly, there's always normal market ups and downs, but as a broad concept you haven't really lost any money.

What company(s) are you referring to specifically? Post that and we can look at what's happened in the past as a guide assuming the company has previously paid dividends (stocks which pay dividends typically pay every 6 months or at least once every 12 months).

 

[rogue1]

I was talking as a very general concept and with no specific companies in mind.

I suppose by accepting the dividend you are getting the benefit of the franking credits as well as avoiding transfer fees and capital gains. Seems like it might be more efficient to just sit on it in most cases.

Thanks...