I am relatively new at this "dividend thing", so please bear with me, but why wouldn't a person buy a stock before the ex-div date and then sell it after after the ex-div date after the PPS goes back up, which it usually does?,
Thank you for the serious and constructive replies; I now have a better understanding ----- so realizing that no one has a crystal ball, do you think the price will go back up or further down?
Thats the idea if you buy a stock at 50 dollars and after 1 yr its 50 dollars you have a yr of dividends taxed at 15%. If its a good solid company you will make more money doing that. I have owned nly 4 yrs and have collected many divs. I am averaged in about 16. Inly is basic for investment not a trade.
AGNC common does some fairly consistent things. one of them is an ex-dividend decline nearly equal to the dividend amount from the close pre-ex to the open on ex. plus or minus. through the quarter you will tend to see an increase by the div amount. plus or minus overall market impact. once the div is announced, an increase by the div announced, plus or minus, is common.
to make matters worse, option expiration tends to be in the same week as the ex date.
this time around, i managed to harvest a dividend equivalent of $1.59 in an IRA account by being patient, and am now back long.
Go look at the Yahoo historical prices the day before and after the dividend date and the answer to your question will be clear. It is easy to do because the dividend dates are clearly indicated in the table. Look at the closing price, not the adjusted closing price which accounts for the dividend drop. The adjusted price is used for volatility calculations only. When they calculate the adjusted price they subtract out the dividend for all previous prices before the ex date. Thus if you look back far enough on a mature stock, say 15 to 20 years, the stock price will eventually become negative. However AGNC has not been around that long.
The point is that you will make $1.25 on the ex date but the stock price drops by the same amount. However, in theory, the stock price should rise by about $1.25 between ex dates. Thus it is the person who holds the stock between those dates who earns the dividend. This is how the option traders play the stock. They look for the period in which the stock makes the most rapid increase and buy call options and then sell them about those times. This was working pretty well for AGNC until recently.
The PPS has been trending upward over the past couple years due to the REIT sector being in favor. To say that a stock's price "usually" goes back up after the ex date is not quite true.
If rates change differently from how AGNC's management forecasts they will change, PPS losses could easily exceed the dividend yield. However, I believe management has adequately hedged and this is a reasonable medium term position.
gene !! take a look at the Historical prices. Some hold and collect or reinvest the dividend. Others Sell b/4 Ex date and buy back in later in the quarter, so there money is at risk less and have a historically better opportunity for gain. Study the historical prices and make up your own mind.
Hello, the options sales people who post non-stop need you to follow their trades. it's how they make money in fees. Your method will limit trading and fees. you might actually have a profit. But why sell if the dividend is 15% s & p gained 14% last year. We are at record highs. so the div. Is stronger than the broad market. over trading cost the investor...big cash. Glty.
Sentiment: Strong Buy
Obviously your shotgun posting approach is more important than using correct numbers. With all your beating of the ‘total return’ drums; at least you should have included dividends in the numbers you posted. Even without divs your 14% number is incorrect.
Whether you are a Bozo, flame, or a virus__one thing for sure this post exposed your lack of fundamental financial analysis.