Wednesday, August 29, 2012
Dividend- Should we pay for it?
I have posted this ridiculous question because I saw a fair bit of illogical behaviors in this strange market. For example, when NCB announced in April 26 that it proposed a dividend of 56 sen, the share price rose nearly RM1.00. After the payout, the share price dropped back to where it was before the dividend announcement. See the chart below.
I always tell my client not to chase after a stock for dividend. It is not that I do not believe in buying good dividend stocks, but one should not get into a stock which had risen substantially just to get its dividend. Those who bought into NCB at RM4.60 to get the dividend of 56 sen, would find it very painful to see the stick dropped back to RM3.90- a drop of 70 sen. Paying 70 sen upfront for a dividend of 56 sen sounds like a bad trade to me!
Chart: NCB's daily chart as at Aug 28, 2012 (Source: Tradesignum)
The better approach is to identify the high dividend paying stocks and go to the Bursa website to identify when the stock's next dividend payout will be. For example, you can identify the dividend payout date for NCB by going to this web page (here). Once you have identified the approximate announcement date (normally, coinciding with the announcement of quarterly results), then you can track this stock & buy it during correction or on weakness as the relevant date approaches.