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Telefónica, S.A Message Board

  • fwb54 fwb54 Nov 9, 2010 2:00 PM Flag

    4.5% down since ex dividend

    Anybody have any explanations?

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    • Profit taking, dividend capture players, lower yield/bad price and good trading strategy.

      1) Profit taking: TEF hit a low of $53.xx around 6/7/2010 and then rallied to $82.68 right before the dividend. Some traders and investors probably took their $29.68 profits off and went to the sidelines; forgoing the dividend. Plus, a $29.68 profit is almost 6 years of dividends at a $5 per year rate. At some point money is money and you need to bank it.

      2) Dividend capture players: If they held for the $2.70 dividend TEF dropped to $80.06 ex-dividend day -- dropping $2.62 all but $0.06 of $2.70 dividend. A little bounce to close at $80.85 the day following ex-dividend gave even a little bit more juice (dividend of $2.70 plus $80.85 price is like selling for $83.55 before ex-dividend) and an extra day to think about selling.

      3) Yield: $5 dividend at $55 is a 9% yield. $5 dividend at $82.68 is a 6% yield. A 9% yield is compelling, a 6% yield is common in telecom at that time (T, VZ, WIN, CTL, FTR) and a reason to sell TEF and buy something else. For a price sensitive investor, $80+ is a bad price given a 6-month low of $55 or so.

      4) Good trading strategy: I seriously consider selling when a stock that has a nice run up starts to go down. TEF dropped almost a dollar a day from $82.68 to $64 11/30/2010. At some point holding on to a stock that pays $5 per year in dividends for an $18.68 loss of market value does not make sense. Non-TEF example: I bought KO at $53 and it just never seemed to pull back. It hit $65 and sat. Then on 1/3/2011 KO was down on a good day for the market. KO was also down the following day so I sold for $64.60. If I bought back here at $63, I've pocketed almost 1 years worth of dividend, but I think KO now trades lower. ($64.60 - $53 = $11.60 profit or 6 1/2 years of KO's 1.76 dividend.) I was virtually certain when I sold I could buy it back several bucks lower. Does KO trade back to $53, probably not. Does KO trade below $60, probably and I will be looking to buy.

      TEF is in my buy range now. The 6-month closing low -- which I use to measure my risk -- is $57.16 or $9.41 down from here. That is about 2-years worth of dividends to cushion my loss if TEF goes down. 7.5% yield here is now better than VZ, T, CTL and a few others, that should attract some swapping out of US telecoms into TEF.

    • And every time the illiterate traders in Wall Street get spooked by Euro they sell everything in Spain ie. short the index.

      ENver mind they are also shorting a Latin American growth juggernaut with a 9% dividend yield for 3 years and 10% EPS growth annually virtually certain.

      I am buying. Again.

    • I think it is a combination of the Euro, Spain's economy, missed estimates, and the US markets starting a correction. I think the market will drop another couple hundred points in the next week or two and I am thinking TEF will hit the high 60s when it does. Once that happens I plan on sinking a lot more money into this stock. I don't like to recommend stocks to people but this is one that I think is a great buy (long term).

    • I don't know why, I was hoping you would. Maybe because the Euro has been weak vs. the dollar this week?

 
TEF
10.01+0.27(+2.77%)12:55 PMEST