Dividends are an important part of our overall profit from an investment. They’re paid from profits declared by the company, and with a mature, stable business you can expect a rising dividend ahead of inflation paid twice a year at interim and final results.
The next trading day is then the ex-date when the stock is now trading without the dividend and as a rule the share will fall by the dividend amount. Some traders buy into shares for the dividend payout, but, given the inevitable post-payout fall, this doesn’t really work. That said, a quality company will “recover” the dividend quickly enough, but this brings us to the real problem — tax.
Does this mean we should avoid buying into shares just for the dividends? No. But you should know the tax implications beforehand.
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Source: FinancialMail - 🏆 20. / 63 Read more »