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A dividend calendar is one of many features we offer at High Yield Wealth. The calendar presents the ex-dividend and dividend-payout dates for all our recommendations over the next 12 months. We also publish a monthly dividend table, with accompanying commentary, at the end of the each month for confirmed dividend dates for the next month.
Our more intrepid readers will write and ask, why bother? Nothing can be gained from trading around a dividend, they reason. After all, the exchange surely negates any trading strategy by adjusting the share price lower on the ex-dividend date.
The High Yield Wealth reader who writes the aforementioned inquiry infers something we’re not implying. We’ve never implied that there’s a trading strategy associated with our dividend calendar. Providing information is the calendar’s primary purpose.
That said, the right information about a dividend can lead to a profitable trading opportunity.
It’s true enough that what’s commonly known by investors is already reflected in a company’s share price. What’s commonly known will usually get you nowhere. But not everything is commonly known. For instance, surprise changes in a company’s dividend policy can lead to a profitable trading opportunity.
In 2014, Target Corp. (NYSE: TGT), a High Yield Wealth recommendation at the time, was on the outs with investors: Target was still working its way through a credit card breach that all but ruined the previous Christmas shopping season. A recent billion-dollar expansion into Canada was an unquestionable disaster. The previous CEO had been given his walking papers and a new CEO – an unproven commodity – was about to take charge.
Investors were pricing Target for the worst, except the worst was in the past. How do we know this? Target management told us through its dividend.
On June 11, 2014, Target declared its next quarterly dividend, and it surprised investors with a 21% increase over the previous quarterly dividend. Given Target’s trials and tribulations over the previous year, few investors were expecting a single-digit increase, much less a double-digit increase.
A lot had gone wrong for Target over the previous 12 months, but that didn’t mean a lot couldn’t go right over the next 12 months. Target management told investors as much with the dividend increase. To be sure, a dividend isn’t a written contract like an interest payment on a bond, but it is an implied contract, and it’s one that responsible management takes seriously.
To say that Target’s unexpected dividend increase didn’t present a trading opportunity wouldn’t be entirely right. For at least a couple weeks after the company declared its dividend, Target shares presented an opportunity to buy and book a short-term profit.
Target Price Activity (Post-Dividend Declaration)
Dividend investors frequently focus on the ex-dividend date. Yes, the price is adjusted lower by the exchange, but that doesn’t prevent investors from adjusting the price up again. This was the case with Target. The surprise dividend increase told investors past would not be prologue. Better days lay ahead.
We’ve seen similar “trading” opportunities in other High Yield Wealth recommendation. The opportunity arose when investors were surprised by what the dividends told them. The surprise is what’s key.
Over the past couple months, we’ve researched thousands of dividends, and they’ve told us quite a lot. Mostly, they’ve told us that investors can profitably trade on surprising dividend information.
We’ll let you know more about our research in the coming weeks, and what we plan to do with it. For now, we’ll just say that we’ve been quite surprised by what we found.