Selling before ex date then buyback on ex date

[itscw]

Pattern na sa price action ng dividend stocks ang pag taas ng price upon announcement ng dividend payout and ang pag dip on or after ex date. Is it feasible to take advantage of this pattern?

Case study: LTG

Budget: 100,000

Aug 30, 2022

• Buy: 11200 * 8.8/share = 98,560
• Total buying power: 1440
• Ex Date: Dec 01, 2022
• Supposed dividends: 11200 * 0.5 = 5600

Nov 29, 2022

• Sell: 11200 * 9.4 = 105, 280
• Total bp: 106,720

Dec 01, 2022

• Buy: 11900 * 8.9 = 105,910
• Total bp: 810
• Ex date: March 01, 2023
• Supposed div: 11900 * 0.3 = 3570

Feb 28, 2023

• Sell: 11900 * 10.5 = 124,950
• Total bp: 125,760

Mar 01, 2023

• Buy: 12300 * 10.2 = 125,460
• Total bp: 300
• Ex date: May 25, 2023
• Supposed div: 12300 * 0.3 = 3690

May 24, 2023

• Sell: 12300 * 10.5(projected) = 129,150
• Total bp: 129,400

May 25, 2023

• Buy: 13000 * 9.9(projected) = 128,700
• Total bp: 700

Status for August to May:

• projected profit: 29,400; or
• growth of shares: 11,200 to 13000

​

Case study: MREIT

BP: 100,000

Aug 16, 2022

• Buy: 6200 x 15.95 = 98,580
• Total bp: 1420
• Ex date: Nov 22, 2022
• Suppose div = 6200 * 0.2444 = 1515.28

Nov 21, 2022

• Sell: 6200 * 11.85 = 73,470
• Total bp: 74, 990

Nov 22, 2022

• Buy: 6400 * 11.62 = 74, 368
• Tbp: 622
• Ex date: Jan 19, 2023
• supposed div: 6400 * 0.2428 = 1553.92

Jan 18, 2023

• Sell: 6400 x 15.21 = 97,344
• Tbp: 97966

Jan 19, 2023

• Buy: 6600 x 14.7 = 97020
• Tbp: 946
• Ex date: May 24, 2023
• Supposed div: 6600 * 0.2476 = 1634.16

May 23, 2023

• Sell: 6600 x 14.94(projected) = 98604
• Tbp: 99,550

May 24, 2023

• Buy: 6700 x 14.64(projected) = 98,088
• Tbp: 1462

Status for August to May:

• projected profit: -450; or
• growth of shares: 6200 to 6700

​

Hindi considered yung taxes and commissions pero at face value, from an initial seed of 100,000, it is possible to take huge profits or grow your shares by repeating the process of selling one day before ex date and buying back on the ex date. Yes, there will be losses (huge) but you will be able to recover at some point but still grow your holdings (as for the case of MREIT).

Riskier sya compared sa Cost Averaging pero with this approach, one time lang yung paglabas mo ng pera BUT you have the option to skip selling and take the dividends instead. And if you look into the bigger picture, parang PCA lang din ito.

Of course, lahat ng ito ay hindsight and no one can really predict the price action accurately but isn't that the same for cost averaging? So bakit walang strategy centered sa ganito? If meron, bakit hindi sya popular? Ano ang problem sa approach na to?

edit: formatting

 

[gust]

@itscw If it’s working for you then I must say continue doing it. But I must precaution that sometimes company earnings are bad but the dividends are great. Some people will keep holding the stocks prior ex div and will sell them off by the ex div. However, if the company outlook is not that optimistic, that post-exdiv drop might not recover.

Short of saying that you should be wary of buying of dips post-exdiv when the dips/gap downs are not merely attributable to dividend plays.

 

[anielswings81]

@itscw I tried computing the strategy net of taxes for your first case on LTG.

Using your strategy you would have 123,624.08 on May 25.

If you bought 11,300 shares on Aug 30 and held the shares and collected the dividends (without reinvestment,) you would have 122,322.42 on May 25.

The difficult part is telling whether the 1.3% beat is because of a superior strategy or chance. With reinvestment under the buy-and-hold strategy, it’s possible for the 1.3% gap to be even smaller.

I reckon this will also be more difficult to do with larger investments. You won’t have the same nimbleness to buy and sell 100,000 or 1,000,000 shares at the price you want as you do with 10,000 shares.

 

[pastorjeremiah]

@anielswings81 Thanks for this.

I'm not sure if you applied 10% tax on the P 12,860 dividends. If not, the beat is even smaller.

Either way, I agree with you. A 1.3% beat for me is too small for the risk. The numbers only seem to work because the share price rose from P 8.80 to P 9.90.

 

[anielswings81]

@pastorjeremiah Yes, taxes on dividends counted

 

[mjflores]

@itscw Following this thread for additional knowledge. Thanks OP.

 

[pastorjeremiah]

@itscw If you applied buying and selling commissions + VAT on sales on LTG and MREIT, and the 10% tax on dividends, what's the net gain?

What's the May 31 value of your portfolio (value of shares + dividends)?

How much did you gain or lose compared to your original P 100k?

NOTE: You can't ignore the impact of trading taxes and commissions on your portfolio returns. I read a study using US stocks (but I'm too lazy to recall where) showing that long term, "buy and hold" gives better returns than "momentum trading" precisely because of taxes and commissions.

I'd appreciate it if you applied it in your analysis since those are Philippine examples.

 

[itscw]

@pastorjeremiah I will recompute pag uwi ko hehe

 

[simsodep8883]

@itscw Hiiii OP. Nakauwi na po ba kayo? Kidding aside, waiting for the calculations din po with +selling/buying commissions + VAT and div tax.

 

[itscw]

@simsodep8883 tinamad na ako mag compute pero I find some success buying the dips after ex div date then selling on pumps based sa RSI and BB. I still compare yung makuha kong div vs sa profit to determine kung worth ba to hold or sell.