Forego dividends?

badger09

Apologies for potentially stupid question:o

I've finally decided to transfer my Scottish Widows UK Tracker ISA to my S&S ISA with IWEB so I can add the cash to my VLS 100.

The SW dividend dates are 31 May & 30 November. Is there any point delaying the transfer until after the ex div date, or do I just accept that I'm foregoing approx 3 months dividend income?

Hope that makes sense.

Ballard

I don't pretend to be any expert but in my experience the price of a stock generally drops on the ex-div date so you'd get the dividend but lose out on the capital anyway.


I am prepared to be corrected on this though.

Reaper

You are correct.

In theory the share price will drop on ex-dividend day by the amount of the payout, then slowly recover as the next payout date approaches.

In practice there is always lots of "noise" from other factors making the picture less clear, plus I have always suspected people hanging on for the dividend such as the OP was considering might slightly boost the share price a little higher than it should be prior to ex-dividend then it drops slightly more than it should do afterwards when they sell. I always meant to get round to analysing if that holds true across a range of high dividend shares but have never found the time.

JohnRo

http://www.stockopedia.com/content/dividend-stripping-is-it-worth-playing-the-ex-div-calendar-67048/

badger09

Ballard wrote: »

I don't pretend to be any expert but in my experience the price of a stock generally drops on the ex-div date so you'd get the dividend but lose out on the capital anyway.


I am prepared to be corrected on this though.

Yes, I realise that happens with individual stocks, but does the same hold true for a FTSE 100 tracker fund?

JohnRo

To a lesser extent, depending on the weight of individual components, it would have to be reflected in the tracker's unit price, wouldn't it?

In terms of the fund itself I don't know how the payouts could affect the unit price over and above the price of the components within. The unit price is not like a share price that rises and falls on buys and sells of the units themselves.

The payout is simply a distribution of the individual dividend payments into the funds account and their effect has already been baked into the current unit price.

Thrugelmir

Fund prices are based on the value of the overall fund , this includes income received. So when dividends are paid out. The value of the fund correspondingly drops.

masonic

In addition to the above comments, most open ended funds operate income equalisation arrangements, so your sale price will include an amount of income accrued since the last dividend payment.