Question: How long do you have to hold a stock after a dividend is paid and from which date does it apply?
Answer (by Paul Rickard): If you own it on the last day it trades ‘cum dividend’, then you will get it. If you buy it ex-dividend, you won’t.
Payment is generally 30 to 45 days later.
For example, National Australian Bank (NAB) has declared a 99-cent dividend. This will be paid on 13 December. It went ex-dividend on 4 November.
This means that shareholders who had purchased shares up until 3 November will get the dividend of 99 cents on 13 December. If you bought NAB from 4 November, then you won’t get the December dividend.
Question: We have The Reject Shop (TRS) in our SMSF, we were happy with it up until about 18 months ago.
We’re not good at selling and taking a capital loss, we tend to hold on hoping it improves or we tell ourselves it can’t fall much more – anyway, we’re now down 56%
There seems to be a few on-going issues with The Reject Shop too.
Is there a rule about selling and protecting capital? Should we sell when a stock is down say 25% and its immediate prospects don’t look good?
So often a stock recovers after a big fall, sometimes in the same week.
Can’t see that happening with the Reject Shop. It only seems to be going in one direction…down!
Answer (by Paul Rickard): Sorry to hear about your experience as an investor in The Reject Shop.
To be honest, The Reject Shop (TRS) is not a stock I follow closely.
Firstly, the analysts still like it. According to FNArena, the consensus target price is almost 60% above the current price at $11.57. Sentiment is positive with 2 buys and 1 neutral. On a multiple basis, they have the stock at 9.7 times FY17 earnings, and 8.4 times FY18 earnings
Is there a hard and fast rule? Not in my book. However, there is an old investment adage that goes: “your first loss is your best loss”.
I think there are two questions you may need to answer:
- Have you got something else to invest in, or do you need the cash?; and
- Is the paper loss clouding your view on other investment opportunities?
If you answer yes to these questions, then yes, I think you should sell. If your answer is no to both, and given that the analysts say that the stock is cheap, I would be inclined to hang on.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.
