05-05-2012, 12:38 PM
Now am beginning to see why stock prices tend to rise in the early part of the year. Apart from the usual fund managers doing their annual spring cleaning, this could also be contributed by the fact that the bulk of dividends for most companies are declared at the end of the FY financial report which usually happens from Jan- Mar. Investors then position themselves for the dividend and in the process push up the share prices. They then hold on to the stocks hoping to reap the dividends. Most of the stocks go ex-dividend in May of each year and when this happens, the share price tend to drop more than the dividend being paid out, especially in a weak market. The share price fluctuations tend to overshoot on either side of the sell-buy equation.
Hence it may be more prudent to buy, if one had to, when the shares go ex-dividend or way ahead of the dividend announcement. At the end of the day the buy and hold approach is still best. Just hold out for the dividend for as long as possible.
Hence it may be more prudent to buy, if one had to, when the shares go ex-dividend or way ahead of the dividend announcement. At the end of the day the buy and hold approach is still best. Just hold out for the dividend for as long as possible.