Selling shares before the ex-dividend date

[barraking]

Hi guys,

My first post here. I was wondering if for example one is indifferent between capital gains and receiving a dividend (say assessable income <18,000), would it be a plausible idea to purchase a dividend say 2 weeks before ex-dividend date, and then sell the shares just before it hits ex-dividend date to capture the uptrend movement in share price?

Or would it be wise to trade after ex-div date?

Cheers

 

[Kalaika]

Re: Selling shares before ex-div

Hi Barraking, welcome to the forum.

Whilst it sounds ok in theory, i think it might be a challenging strategy to make work in practice, as there are a lot of factors that impact a company's share price in the lead up to ex-div date (or any other time!).

Depending on the company's results announcement (usually released some weeks prior to ex div date), you might see an immediate run up (or in fact a dip) in share price after results, depending on how the results compare with analysts' expectations (I.e. if its a great result but the "market" expected better, the SP might drop). Often there are finer details of the results, such as market outlook or results of part of the business, that aren't well understood until some days after the announcement, which again may have positive / negative impact on share price. And if a company pays a consistent dividend each half-year, you may see the div factored into share price over a longer period than just a few weeks.

You might be able to find historical trends if you study your target share and look at similar run-ups over past years etc, but again it's probably risky to base an income strategy on this if there are changing dynamics behind each years results.

Hope this helps, just my point of view and good luck either way.