I am tentatively buying some of these due to special div due to be paid shortly. Not sure if I'm reading it properly - it seems to be tood good to be true, a payment of 150 on a share costing 477 or so. Or am I mis-reading something?
understand the attraction-company seems to be in a wind down type of phase-selling off their assets.Question to ask yourself is will share price drop more than size of div when it goes ex div?Not sure I know answer to that?
I thought this might be the case, but I went back to the period leading up to the announcement (a few weeks back) and the share price jumped by far less than 150. In addition, I went back a couple of months. If the share price is built into the price, then it was built in a long time ago, surely before there was even mention of this special div. I'm not arguing for it, just trying to understand why. Perhaps a better question is - why is the price jump after the special div was declared (even including the two months before) less than the amount of the special div?
Not at all. the idea is that your dividends are tax free - so you buy, take the dividend and then sell the share ex dividend at the purchase price less the dividend. You make your marginal tax rate on the dividend amount. So, in fact you can sell the share for up to m.rate x div + div and still break even. LESS than that and you lose - no matter the tax effect. You will probabl lose on this trade. There is nothing much left of this company after the dividend and it is so illiquid that punters will suffer trying to get out and drive the pirce down further.
Thanks Thresh, so can someone tell me this then. If I buy div shares and sell after div, at a loss. Lets say it nets off perfectly and is a zero some transaction. Can I claim a tax loss for my "trading business" with that? or does the div income count in that case? What I'm getting at here is, can I ride up a tax loss trading div shares and claim back PAYE on my salary?
I think if your sole purpose is dividend stripping, then Sars may look at you in a different light.The other thing is you will definitely be classed as a trader, as your aim is not to invest for the long term, therefore any profit from sale of shares will be added to your taxable income, with the result that you could move a tax bracket thereby negating some or all your profit. I am a firm believer that you must have SEPARATE accounts for trading and investing and not mix the two, ever.