Pete Wargent blogspot
Co-founder & CEO of AllenWargent property advisory & buyer's agents, offices in Brisbane (Riverside) & Sydney (Martin Place) - clients include hedge funds, resi funds, & private investors.
4 x finance/investment author - 'Get a Financial Grip: a simple plan for financial freedom’ (2012) rated Top 10 finance books by Money Magazine & Dymocks.
"Unfortunately so much commentary is self-serving or sensationalist. Pete Wargent shines through with his clear, sober & dispassionate analysis of the housing market, which is so valuable. Pete drills into the facts & unlocks the details that others gloss over in their rush to get a headline. On housing Pete is a must read, must follow - he is one of the better property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.
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"I've been investing for over 40 years & read nearly every investment book ever written yet I still learned new concepts in his books. Pete Wargent is one of Australia's finest young financial commentators." - Michael Yardney, Australia's leading property expert, Amazon #1 best-selling author.
"The most knowledgeable person on Aussie real estate markets - Pete's work is great, loads of good data and charts, the most comprehensive analyst I follow in Australia. If you follow Australia, follow Pete Wargent" - Jonathan Tepper, Variant Perception, Global Macroeconomic Research, and author of the New York Times bestsellers 'End Game' and 'Code Red'.
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Friday, 6 January 2012
What is dividend stripping?
The practice of buying a stock just before the dividend is paid in order to receive the dividend payment before going on to sell the stock.
The hope is that after the dividend is paid the share price falls by less than the value of the dividend plus the associated tax benefit received by the investor (the franking credit).
The investor gets a dividend income and a capital loss, the tax treatment of which can make the transaction favourable to the investor overall.
The investor has to be wary of brokerage costs eating in to any profit and the risk of holding the shares overnight (there could be price sensitive news in that time, for example).
Companies themselves sometimes use dividend stripping as a tax avoidance scheme – which is not so good!
The date when the share price drops is known as the ex-dividend date, and most times the share price falls in a rational manner by the amount of the dividend.
Does it work?
It can in a bull market...this strategy can work OK when prices are in an upward trend.
In a bear market the price might fall by more than the value of the dividend, so you’ll be left with a stock you didn’t want to hold at a lower price. So, not so good in that scenario.
The market is generally seen to be 'efficient', so it is hnot straight-forward to make 'easy profits' in this manner.