Big Dividends

[Imperator]

alright, i've been doing some screening for stocks with large dividend yeilds.

you have you have stocks like Altria and Bank of America that have nice 4% yeilds, but then there are stocks with yeilds of 8,9,12, even 14%

My question, does an abnormally large dividend yeild signal something wrong with the stock? Also, how difficult would it be, and what would you have to do to just buy a stock shortly before the dividend record date, and then sell it after the dividend is paid out?

[TonyM]

I had asked a similar question not long ago, and the answer I received was that the trade had to be settled by the ex dividend date and then could be sold on the next trading day.

I went back and looked at my last trade with XOM and found that I had bought on 8/9 while the ex-dividend date was 8/10 which means the funds were not settled, therefore I believe as long as you buy on the ex-dividend date you will be an owner of record and qualify for the dividend. You won't be getting the money right away though, in this case the pay date was 9/11, each company is different. One other thing to consider; the ex-dividend date is usually on Fri, Sat or Sun (afaik) which means you have to bet on no bad news before pre-market on Monday, otherwise you may be stuck waiting to recover your capital.

[unstatusthequo]

Do you need to hold the stock all the way through the actual payment date? Correct me if I'm wrong, because I may be on this, but I don't think so as long as you're a holder on the record date...

Also, I noticed something on wikipedia that I would like to run by everyone to verify as true or false:

When the market opens on the ex-dividend date, the exchanges automatically decrease the price of the stock by the amount of the dividend.This is done because the dividend payout will decrease the value of the company, as it comes directly from the company's reserves.

The other thing to consider is even if the stock price is not automatically adjusted, the price of the stock will probably go down as a payout from company funds has occurred... has anyone seen this as true, and taken advantage of it in the form of short sales or options?

And to correct TonyM, who has the right idea and is close to being 100% correct:
as long as you buy on the ex-dividend date you will be an owner of record and qualify for the dividend.

SEC Website (http://www.sec.gov/answers/dividen.htm):
Once the company sets the record date, the stock exchanges or the National Association of Securities Dealers, Inc. fix the ex-dividend date. The ex-dividend date is normally set for stocks two business days before the record date. If you purchase a stock on its ex-dividend date or after, you will not receive the next dividend payment. Instead, the seller gets the dividend. If you purchase before the ex-dividend date, you get the dividend. Emphasis added, obviously.

[TonyM]

Yes, you are correct. I used the term ex-dividend date incorrectly.

No, you do not have to hold the stock through the payment date, only on the date specified to be an owner of record; it can be sold on the next trading day.

[metalheadrr3]

NFI ... pays about a 20% dividend. REIT that deals with loans and what not. You could actually make some decent money playing the stock as well since it moves a good bit

[unstatusthequo]

FYI on NFI:

The Board of Directors of NovaStar declared a common stock dividend of $1.40 per share, payable November 30, 2006, to shareholders of record as of November 20, 2006.

Also, the Board of Directors of NovaStar declared a common stock dividend of $1.40 per share, payable December 29, 2006, to shareholders of record as of December 19, 2006.

Might wanna drop those on your calendar... I believe that means ex-div dates of November 16th and December 15th, respectively. Payout is only 10 days out from record date... not bad...

[Imperator]

Looking at NFI, I noticed that it has a PEG of 4, is this normal for Reits or big dividend payers?

and looking at the historical charts with dividends overlay, it seems there is a buy up to the dividend and then a drop in price.