It appears that WLO will be paying a dividend of 10c in the next two weeks. The share price is currently 15c. Even if the share price drops 10c ex div (which is unlikely) then the share price of 5c appears to be a bargain given that NAV is indicated at 12.34... What's the catch here?
Im just guessing here cause I know nothing about the share and the following may be about another company but I heard something about they sold off all there businesses and have been sitting with cash. But the catch is there was some legal or tax issue that was pending. they had been hoping for a company to use them to reverse list onto the JSE but the pending issues made it too risky.
my maths sucks but i did a simple calculation. if you have 10k, buy 66660 shares at around 15c each and receive a dividend of 10c, you can have dividend income of R6506.00 including costs of R160.00. surely if the price drops x dividend, you would still make a few bucks...am i wrong?
haahaa. The very first trade I did like 10 years back, I bought a debenture at 85c, thinking that I would make money when they pay the 40c dividend. The debenture dropped to like 20c after the dividend. It did recover in around 6 months to around 60c or so..but point taken!
Ja, this weekend I did a little more research on this one as I believe that something that appears to be too good to be true normally is!! This is essentially a Cash Shell and they are paying out a most of their cash in this Div. As per Fin24 (24/08/2009): "The 10c/share dividend will account for most of Wooltru's fee capital, leaving about R10m in capital and reserves. With most of its capital now distributed to shareholders, Wooltru will have to seek out a reverse listing transaction to ensure new operating assets are brought into the listing." Moving back to 2006, Fin24 again describe this nicely in a article called "Trick or Treat" (31/10/2006): "Cash shell situations are great Halloween tricks, offering the investor a long shot chance that some decent assets will be reversed into a dormant or depleted company. ... The punters' penchant for cash shells has been driven over the years by inspired reverse listing achievements - Coronation, Gold Reef Casinos and resorts, Afrox Health, PSG and (more recently) KAP International. ... At the moment Village Main Reef, Cyberhost, Wooltru and Kelgran would rank as classic cash shells. " I think I'll leave this alone for now...
buyers @14c, sellers @15c .. you buy at 15c it pays 10c div an assume it drops by div amount (any other assumption is hope an that's not a strategy) .. now you got buyers @4c, sellers @5c .. you sell at 4c .. you lost the spread and you paid costs ..