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Windstream Holdings, Inc. Message Board

  • counselor711322 counselor711322 Sep 13, 2013 5:44 PM Flag

    Ex-dividend bump

    With the stock going ex-dividend in nine trading days, WIN historically gets a bit of a bump as the qualified dividend is taxed more favorably than a short term capital gain. However, that being said I don't see anything more than 0.60 between now and September 26. If it goes beyond that, it is only short covering temporarily fueling or amplifying the rise.

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    • Most of the dividend is treated as return of capital. Remember when you got the letter from the brokerage firm telling you to do a Amended Return for your taxes? 33% of the dividend is qualified. 66% is return of capital.

      • 3 Replies to want2bik
      • Most of the dividend is treated as return of capital. Remember when you got the letter from the brokerage firm telling you to do a Amended Return for your taxes? 33% of the dividend is qualified. 66% is return of capital.

      • That was just the one quarter.

      • Investors run into that problem when they invest in a high yield stock with inadequate earnings to cover the dividend. It is similar to a MLP or close fund investment where return of capital is a component of the distribution. It's too bad that WIN didn't plan a little better and save their shareholders the frustration of an amended tax return. I assume WIN thought they were okay but the IRS informed them otherwise after the fact. The easiest way around this is to have high yield investments like WIN in a tax deferred account. Otherwise, you have to file an amended return if the amount is enough to make it worth your while. Of course, you could always sell WIN but I assume you're still holding since you replied on the WIN message board.

    • I'm glad you don't expect anything more than 0.60 between now and September 26th. For the last 8 dividend payouts, the stock price was higher 10 trading days before than a few days before xdate, 5 out of 8 times. Most of the time you will loss money trying to buy the pre "runup" to the xdate for WIN. Maybe it will be different this time and maybe you'll draw into an inside straight too.
      The odds favor a reverse dividend capture. Set a limit order for around 37 - 40 cents below the close of the date before xdate. Historically speaking, you should be able to unload a week or so later at your limit price + 40. I've done this a few times with WIN with good results so far. I personally don't try for a quick end and out for a 0.15 cent share move but some people take that approach. I use this approach to just add to my position.

      • 1 Reply to ktumle
      • I don't think that this will gain 60 cents between 9/13 and 9/26 either.
        Certainly not the way it seems to be trading in the last couple of days. The last couple of days seem very anemic, trading-wise
        I drew a couple of channel lines around the trading of the last couple of weeks, and by the estmation of what those trading border-lines reveal, WIN's price will be no more than $8.73 per share by the close of trading on 8/25.
        That looks like the maximal, possible limit of upside by ex-div date (unless there is some unforseen postive news event between now and then). I was pleasantly surprised by the announcement of the Veterans contract, and yet, the stupid market is yawning it off.
        That seems crazy. A $12MM contract is far better than a $0 contract, anyday; yet, to wall street it's nothing. It kind of gives me the impression that someone(s) are trying to hold WIN down.

        I actually think that your theory will prove true here. At least the last 3 of the divi payouts have happened on fall-offs of the stock price, so you're right about that.
        There is a $9 target price on WIN which hasn't been struck yet.
        I was hoping that it would come in range during this divi-payout time period, but that doesn't look likely either. We shall see. Maybe it will run towards $9 after divi-payout, and (more likely) maybe it won't.
        But $9 per share hasn't realistically been in my strategy since the August earning disappointment.

        Good luck and hopefully your theory wins out here!

        Sentiment: Hold

 
WIN
8.18+0.4900(+6.37%)Apr 20 4:00 PMEDT