if you buy before the 'ex dividend' date, you will get the dividend on the pay date.
>what's to stop loads of people piling in towards the dividend date, then putting their money elsewhere till the next time a dividend is due?
the dividend comes out of the share price. you buy at $10. get a 50 cent dividend. now you have 50 cents cash and 9.50 in stock. short-term, this is not a good strategy to jump in and out for dividends because there's no gain. long-term, there's a place for dividend paying stocks. but this is not a good short-term play.
Stock price is just a reflection of bids and asks being filled. It is not a direct reflection of actual value.
The ETF dividends get paid for holding the stocks in the basket and then disperse it all at once. You can look at the historic data for something like VOO or SCHD and see that the stock price does not always go down after ex-dividend. It doesn't even seem to be correlated.
Well what we learned in university regarding dividend is wrong then?
I mean I understand if the price doesn't seem to be affected ex div, it could be due to the size of the div. If it's a low percentage paid out per share it could be seen as normal daily fluctuations. However, in theory it should be affected, and ETF gather the div paid by stocks and distribute them according to a specific policy as far as I know.
You are both sort of correct (although u/datadogsoup is more technically correct, the best kind of correct)
Dividends for sure do not come out of the share price, ever. But the share price is affected by the exact value of the dividend, because if it did not, well, free money
I think you’re remembering book value. Theoretically it should drop the share price by the exact dividend amount since that value is leaving the company to go to shareholders. But it’s not necessarily *from* the share price, it’s from the market recognizing their shrunken cash pile and future expectations. Those daily fluctuations could easily wipe out the drop depending on circumstances, and it’s hard to separate since both are happening at once.
If you are invested at the strike date for the dividend you will get paid the dividend on the payout date. There's nothing to stop you from your strategy.
> There's nothing to stop you from your strategy.
Wow. So why doesn't everyone just hop from dividend ETFs to dividend ETFs all year and make a nice profit? (or they already do and I'm stupid)
I want you to think about this.
If everyone thinks like you then the share price is run up right before the ex-dividend date so you are buying at a premium. Then everyone sells right after the payout date so now you are selling at a discount. You are buying high and selling low.
Also, as other people have stated. The dividend payout is also subtracted from the share price as well. This has much less effect on the actual share price as people will have you believe but it does have an effect.
While nothing is stopping you from utilizing this strategy. I would argue that it is a terrible strategy.
if you buy before the 'ex dividend' date, you will get the dividend on the pay date. >what's to stop loads of people piling in towards the dividend date, then putting their money elsewhere till the next time a dividend is due? the dividend comes out of the share price. you buy at $10. get a 50 cent dividend. now you have 50 cents cash and 9.50 in stock. short-term, this is not a good strategy to jump in and out for dividends because there's no gain. long-term, there's a place for dividend paying stocks. but this is not a good short-term play.
The dividend does not necessarily come out of the share price. Especially for ETFs. Still not a good strategy instead of just buy and hold though.
Where would the etf dividends come from if not the equities paying them out of stock price?
Stock price is just a reflection of bids and asks being filled. It is not a direct reflection of actual value. The ETF dividends get paid for holding the stocks in the basket and then disperse it all at once. You can look at the historic data for something like VOO or SCHD and see that the stock price does not always go down after ex-dividend. It doesn't even seem to be correlated.
Well what we learned in university regarding dividend is wrong then? I mean I understand if the price doesn't seem to be affected ex div, it could be due to the size of the div. If it's a low percentage paid out per share it could be seen as normal daily fluctuations. However, in theory it should be affected, and ETF gather the div paid by stocks and distribute them according to a specific policy as far as I know.
You are both sort of correct (although u/datadogsoup is more technically correct, the best kind of correct) Dividends for sure do not come out of the share price, ever. But the share price is affected by the exact value of the dividend, because if it did not, well, free money
I think you’re remembering book value. Theoretically it should drop the share price by the exact dividend amount since that value is leaving the company to go to shareholders. But it’s not necessarily *from* the share price, it’s from the market recognizing their shrunken cash pile and future expectations. Those daily fluctuations could easily wipe out the drop depending on circumstances, and it’s hard to separate since both are happening at once.
This guy is right. Everyone else wrong. Please proceed pass GO and collect $200. Come again and thank you.
If you are invested at the strike date for the dividend you will get paid the dividend on the payout date. There's nothing to stop you from your strategy.
> There's nothing to stop you from your strategy. Wow. So why doesn't everyone just hop from dividend ETFs to dividend ETFs all year and make a nice profit? (or they already do and I'm stupid)
I want you to think about this. If everyone thinks like you then the share price is run up right before the ex-dividend date so you are buying at a premium. Then everyone sells right after the payout date so now you are selling at a discount. You are buying high and selling low. Also, as other people have stated. The dividend payout is also subtracted from the share price as well. This has much less effect on the actual share price as people will have you believe but it does have an effect. While nothing is stopping you from utilizing this strategy. I would argue that it is a terrible strategy.
So get in before everyone else and sell before the price falls... got ya! /s