Witnessed this strategy employed with great success on a small scale and curious if I can improve upon the analytic methods....
Special dividends are unique, one-time distributions by companies of abundant financial strength
When a company pays a special dividend, the share price generally drops an equivalent amount to the dividend paid. Certain stocks recover from this drop faster than others - I am out to find the rebounds.
In theory, if I find stocks with declared special dividends, which trade off of growth potential (high forward earnings multiples) rather than on their balance sheet fundamentals, such stocks should recover quickly from any temporary drops from special distributions. ex. XXYZ is priced at $50 and declares a $10 special dividend. On record date, the stock drops from $50 to $40 and pays out $10 in divi. Over the next 8 weeks, XXYZ recovers to $50 allowing one to sell out at breakeven while keeping a 20% distributions les taxes.
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