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Annaly Capital Management, Inc. Message Board

  • teddirk teddirk Mar 27, 2013 1:57 PM Flag

    NLY ex dividend zero sum game?

    So value of my NLY holding was reduced by 0.45 per share today for the dividend I will be receving at a.later date. How do I gain anything if that's the case? To me it seems like a zero-sum game or am I missing something?


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    • Certainly NOT zero sum if you would have bought at $13.72.....

    • As a REIT, NLY is required by law to pay dividends for most of the profits of the company.

      But this is how ALL dividends work.

      Suppose I have a tire store and I sell tires, and i'm profitable. Today my bank account is $1000, tomorrow its $1001, the next day its $1002. Since the tire store is in a small town with no real room for growth, I don't have any way to re-invest this month in the business, so after 3 months, my bank account is at $1100. The actual owner(s), the investors say hey, how's my business doing? I write them a dividend for the $100 in profit I had over the quarter. The "stock price" will reflect the real time value in the bank account, so it will go from 1000 to 1001, ... eventually to 1100, then the dividend check is written and the stock price goes back to 1000.

      A lot of people don't like dividends. But for better or worse, its what most companies in the US use. My advice: Research automatic 'dividend reinvestment plan' (DRIP) and if you broker wants to charge you fees for this, just know that online brokers don't charge fees.

    • yes,yer missing something - took me years to understand the SIMPLE concept that part of the price per share is the div that's about to go "ex" - then on that day that div belongs to whoever holds the share, so the share price naturally doesn't include that amount - who in their right mind would pay the same price on ex-div day that they would have paid one day earlier, if they know they're not entitled to the div on or after ex-div day? So, naturally the price drops (' course there are MANY other factors that determine share price at any given time)
      Look at any 1- or 2-year chart and notice that the price of most dividend-paying stocks drop ON ex-div day, and then begin to go up again in the following days during each quarterly dividend cycle.
      As I said there are LOTS of other factors that deteremine share price, but for div-paying stocks you should see an increasing price leading up to each ex-div date..(other things being equal, [which they never are]).
      Hope this helps (no guru here) - there's a LOT more that can be said (and learned).....

      • 1 Reply to uhlerf
      • Well, out of thin air my portfolio dropped by $500 today and the explanation I was given by my broker was because it was in order to pay for the 45 cents dividend in April. Even though NLY is up a cent today my holding is down almost 3% or about $500 dollar. I still doesn't make any sense...I bought the stock in October 2012. This dividend thing sounds like a ponzi scheme to me.

        If I borrow 10K from you today and give you $500 quarterly and tell you that you are getting an annualized return of 20%. However, each quarter I give you $500 for your dividend, I reduce your Principal $9,500, $9,000, $8,500 and so on....

        Isn't this essentially what NLY is doing?

    • if you sell your stock today, then yes, but if you keep it and it goes back up, then its not! and i dont think you are selling today are you

      Sentiment: Buy

    • I don't understand your question...

      Sentiment: Strong Buy

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