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A Question on Special Dividends (TLAB)
Posted on 12/5/12 at 11:28 am
Posted on 12/5/12 at 11:28 am
So I was just skimming through the business section at work and noticed a piece on companies paying special dividends at the end of the year.
Well, I noticed Tellabs (TLAB) was one of the companies participating. They are offering a $1.00 dividend for shareholders as of December 14. The company is currently selling at 3.37. If I bought 300 shares, and held through the 14th, would I receive $300? It almost seems to easy. I have to be missing something.
Here is a link explaining the dividend...
LINK
Well, I noticed Tellabs (TLAB) was one of the companies participating. They are offering a $1.00 dividend for shareholders as of December 14. The company is currently selling at 3.37. If I bought 300 shares, and held through the 14th, would I receive $300? It almost seems to easy. I have to be missing something.
Here is a link explaining the dividend...
LINK
2
Posted on 12/5/12 at 11:32 am to OnTheBrink
The stock price will drop by the dividend amount on ex-dividend date. So you really gain nothing and have to pay taxes on the dividend. The market is far too efficient to allow such a simple arbitrage in my opinion.
This post was edited on 12/5/12 at 11:33 am
Posted on 12/5/12 at 11:44 am to OnTheBrink
As long as you buy before ex dividend date and don't mind paying trade commission, dividend tax, incurring the potential loss if the stock goes down once you sell or the possibility of capital gains tax when you sell the stock. It' s up to you. 
Posted on 12/5/12 at 11:51 am to Notro
I tried a similair play this past year on a $4 special dividend. Past special dividends didnt seem to have much effect on the share price (recovered after Record Date selloffs). Not only did it drop almost exactly $4 on this record date, it dropped another 10% the next day.
Lesson learned......dont chase special dividends.
Lesson learned......dont chase special dividends.
Posted on 12/5/12 at 11:56 am to Chris4x4gill2
It will open lower by the dividend amount. However, if enough buyers are there it can go back up, buut it is not a guaranteed profit like the OP was hoping for.
Posted on 12/5/12 at 12:08 pm to Janky
Thanks for the responses, kind of what I was thinking...
Does the selloff usually occur on that day or the day after? If it occured on that day would it be worth it to try and buy at the end of the day after most of the selloff has begun?
Does the selloff usually occur on that day or the day after? If it occured on that day would it be worth it to try and buy at the end of the day after most of the selloff has begun?
Posted on 12/5/12 at 12:21 pm to OnTheBrink
doesnt work that way. You have to buy on the Ex date - 3 days prior to the record date - and then sell it on or after the record date to recieve the dividend.
Posted on 12/5/12 at 12:31 pm to OnTheBrink
quote:
Does the selloff usually occur on that day or the day after? If it occured on that day would it be worth it to try and buy at the end of the day after most of the selloff has begun?
The stock will open on ex-dividend date lower than the closing price the day before by the dividend amount. It could then go up or down.
Posted on 12/5/12 at 12:44 pm to Janky
Thanks all!
This post was edited on 12/5/12 at 12:45 pm
Posted on 12/5/12 at 1:08 pm to Chris4x4gill2
quote:
. You have to buy on the Ex date - 3 days prior to the record date - and then sell it on or after the record date to recieve the dividend.
This isn't right.
There's no way that you can miss out on the dividend by selling between the ex-div date and the record date.
Posted on 12/5/12 at 1:16 pm to TheHiddenFlask
You have to buy it on or before ex-dividend date. The reason why the record date is 3-4 days after is that is the settlment period. That is how long it takes for a trade to settle and ownership to change, typically T+3. I guess techinically you could miss the dividend if you are buying an actual certificate or something where the registration is not automatically changed.
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