You could improve your return by selling the share instead of waiting for the dividend payout—but there are caveats …
I WAS recently asked an interesting question about dividends. The person concerned was curious as to whether—from a tax and return perspective—it is better to take the dividend itself, or sell the share and take the profit prior to the dividend payout.
It is therefore important to understand how the declaration and subsequent payment of a dividend impacts the share price, all else being equal.
The easiest way to explain how this works is through a real-life example—that of thermal coal producer Thungela Resources Ltd (JSE code: TGA).
On 15 August 2022, Thungela announced that it was declaring the payment of a dividend of R60 per share. In the same announcement, it stated that the last day for trading to qualify to receive the dividend was 20 September 2022.
The share would then trade ‘ex-dividend’ from 21 September 2022 onwards.
In simple terms, this means that if you were a registered shareholder at close of business on 20 September 2022, you would be entitled to …