Timeline for Why do we need an ex-dividend date?
Current License: CC BY-SA 4.0
5 events
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May 10, 2023 at 2:35 | comment | added | AKdemy | A stock trades. If you are certain to not get the dividend, why would you pay for it? Hence the price drops. Out of hundreds of thousands of stocks, a handful sometimes may not end up paying. The only example you have are from a pandemic that was so exceptional that' something similar didn't happen for about a hundred years. Synthomer shares tumbled when it announced to suspend dividends (-13%, down 79% 12m change).Or put differently, do you prefer your firm to survive or pay a small dividends and go bankrupt, which usually means you will not get any more money from your stock going forward. | |
May 9, 2023 at 22:15 | comment | added | s5s | I agree that it is unusual to cancel dividends. However, it is precisely when these events happen that you want accurate valuations. My question is - why not discount at the payment date? What's the point of price going out on ex-dividend? | |
May 8, 2023 at 13:08 | comment | added | AKdemy | At least on the US, cancelling final dividends is almost impossible as shown in the reference I provided. Wouldn't you agree that it is a very unlikely circumstance that dividends were suspended during Covid. In exceptional times like these, pretty much everything is possible. E.g. the Swiss government agreed to change legislation that bypasses shareholder approval in the case of Credit suisse (a different subject but it shows nothing is certain in life). | |
May 8, 2023 at 12:36 | comment | added | s5s | At the start of the pandemic, all UK banks (incl. HSBC) were told by the FCA to suspend dividend payments. This was also applied to other financial institutions such as insurers. In the UK on the London Stock Exchange, Synthomer plc had an interim dividend announced on 2-Aug-2022 with ex-div date of 6-Oct-2022 and record date of 7-Oct-2022 to be paid out on 4-Nov-2022. On 12-Oct-2022 they suspended the dividend including future dividends until end of 2023. Are you suggesting that interim dividends may be cancelled after the ex-div date but for final dividends this is almost impossible? | |
May 7, 2023 at 20:45 | history | answered | AKdemy | CC BY-SA 4.0 |