Forum Archive Index - June 2000

["Jeremy" <jardley@electrosilk.net>]

 From: Oliver Shapleski <oliver.shapleski@vuw.ac.nz>
 > A payment of a dividend AUTOMATICALLY and ALWAYS drops the share price.
 > Watch Telecom go ex-dividend on Tuesday and observe the share price.  All
 > other things being equal the price of the share will drop by the amount
of
 > the dividend less tax.  Historically shares go ex-dividend at a price
down
 > 75% of the amount of the dividend.  Thus all things being equal when
 Telecom
 > goes ex-div the price of the share will fall by .75 x 11.5 cents.  The
75%
 > amount will vary depending on the tax structures of the country concerned
 > and the proportion of institutional investors vs small investors.

 Nice red herring.  Irrelevant of course, since the example has buying and
selling at the same point in the company's financial cycle.
If you buy just after ex-dividend, presumably you sell at the same time next
year, just after ex-dividend.  Nett result NIL

 You still haven't explained how you roll up to the bank a year after
borrowing their money and pay them their interest and capital when you have
negligible dividends from the company.  I suspect "Aw shucks, it could've
been a winner if the market was better" won't wash.

 I say again, your plan expects share prices to increase significantly
better
than long term averages.  Not a hope in hell in NZ right now.

 At the moment, stick with sound companies with good and predictable
earnings. Specifically, don't invest in any company that can't pay for the
cost of the money you use.

 Jeremy





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