Dividend Question - Ex Div Dates

MonroeM

MPN wrote: »

So, as above I bought £10K of shares in BRSC on 3 May for 1423.00 prior to the ex div date and today on the ex div date it closed at 1485.00.

So on this occasion if MonroeM waited for the share price to drop on ex div date then she would have had to pay more for the shares and not receive the 16.00p dividend.

In the end I did actually buy my shares prior to the ex div date. It cost me slightly more than you at a share price of 1425.00 so I will also receive the dividend. I feel BRSC are a good long term investment but I suppose we will have to see what impact the final Brexit deal will have in the future on all UK smaller companies funds or IT's?

StellaN

MonroeM wrote: »

In the end I did actually buy my shares prior to the ex div date. It cost me slightly more than you at a share price of 1425.00 so I will also receive the dividend. I feel BRSC are a good long term investment but I suppose we will have to see what impact the final Brexit deal will have in the future on all UK smaller companies funds or IT's?

The final Brexit deal (depending on what it is) will have an impact on all UK companies not just UK small companies so we will all have to wait and see what happens.

soulsaver

Now there's an interesting observation: "...if you buy just before the xdiv date essentially you're getting your own money back.."
.. but it's taxable!

bowlhead99

soulsaver wrote: »

Now there's an interesting observation: "...if you buy just before the xdiv date essentially you're getting your own money back.."
.. but it's taxable!

Yes, you have bought part ownership of a company, and that company has been making profits for years and holds an amount in its bank as cash (or in investments/ receivables readily turnable-into cash) which it has proposed to pay out to its investors to thank them for the use of the Investors' funds. When it pays out, it'll be taxable income to the investors who are reaping the spoils of ownership of that company.

If you buy existing shares of the company the afternoon before it goes ex-div the following morning, you are buying (as part of your overall ownership), a load of pounds-worth of assets of the company which are just about to be sent out of the company as dividends to the investors, including to yourself. Meanwhile, the person who sold you the shares has benefitted from the profits being made and the consequential rise in the amount he can get you to pay to take each share in the company off his hands, but he will not get that reward paid to him in cash from the company, by way of taxable dividend. Instead he will get the value from you - embedded in the sale price - when he sells the share to you.

He'll make a higher capital gain or lower capital loss than if he'd waited for ex div day and sold the shares without the rights to the dividend. Meanwhile you will get a dividend straight away, and if you then choose to sell the next day, all things being equal, you'll make a capital loss.

Being a buyer just before ex div day will be fine for a lot of people who don't mind receiving dividends (covered by annual allowance or chargeable at <10% income tax for basic rate payer), especially if they get an instant unrealised capital loss that they could offset against capital gains that they'd be paying 10% tax on. And many investors don't pay tax on their dividend income (eg UK corporates, charitable foundations etc) ; and some not on their dividends income nor gains either (trillions of pounds of pension fund money).