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Vet67to82 (< 20)

Ship Finance (SFL) and dividend capture

Recs

33

March 26, 2008 – Comments (0) | RELATED TICKERS: FRO , VLCCF , SFL

   There are many components that go into the direction of the stock price for a company.

    1  The market direction,

    2. The Sector direction,

    3. The company/s actions,

    4.  News, good or bad,  about other tanker shipping cos, or Ship Finance (SFL)

    5. Dividends

         Number 5 is important in Ship Finance's (SFL) case as there clearly appears to be trading being done in SFL shares for the sole purpose of capturing the dividend.  Let's call them the "dividend capture guys (dcg)"  with no disrespect that they may be "dividend capture gals (dcg)".  If you have charting software overlay the chart with the dividend announcement date, the reporting date, and the ex-dividend date.  Go back and look at Ship Finance's stock price action around previous dividend dates.  You'll see what I mean.  This action gives you several options to make a lot of money trading SFL. 

     1  Buy in and get out before the ex-dividend date ... before the dividend capture guys waiting for the dividend.  This strategy lets you capture the price appreciation ... but you give up the dividend. You'll do a lot of trades ... so you have to consider TAXES (short term gains) and the effect of COMMISSION costs on your end result ... which we hope is lots of net profit.

     2 Buy in and get out after the ex-dividend date.  Here you capture the dividend but you risk giving up some of your appreciation as the dividend capture guys are bailing out to get to the next company.  Again, you have to consider TAXES, dividends are treated differently than gains, and the effect of commissions.

     3 Buy and hold.  This is still a good plan.  You can use the volitility created by  the DCGs bailing out to pick your entry price...then you sit back and collect 8 - 9 % dividend yield.    

      There are a lot of good companies the DCGs use like a revolving door.  Happy Hunting!

 

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