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View Poll Results: What is Annual Amount of Your Cash Investment Earnings
<$15,000 42 31.11%
<$30,000 31 22.96%
<$45,000 21 15.56%
<$60,000 12 8.89%
<$75,000 5 3.70%
<$90,000 5 3.70%
<$105,000 7 5.19%
<$175,000 7 5.19%
<$250,000 3 2.22%
>$250,000 2 1.48%
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Old 09-23-2012, 08:43 AM   #61
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The reason that an open limit order is adjusted for the cash dividend is because the party placing the open limit order made the limit based on the pre-dividend market price and the rule adjusts the limit order (not the stock price) by the dividend once the stock goes ex-dividend.

Stocks work different than funds. (Open end) fund prices are based on net asset value and NAV decreases exactly by the amount of dividends paid. Individual stock prices are based on supply and demand, so while they are affected by the payment of a dividend, the effect on the price of the stock is not necessarily exactly the amount of the dividend.
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Old 09-23-2012, 08:50 AM   #62
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a funds nav is identical. its nav always reflects the supply and demand of every issue it holds. its nothing more than a collection of individual funds . it just collects all its gains ,interests and dividends and pays them out together rather then seperatly as they come in but the consept is the same..
----------------------------------------------------------------------------------------------------------------------------
the exchanges reduce the price of the last quote of the previous days trade.

But because the quote of the previous day's closing trade AND the bid and the ask of all outstanding orders are also reduced (unless placed with a Do Not Reduce restriction) by the exchange the stock usually opens based on the reduction.

"
NYSE Rule 118 and AMEX Rule 132 dictate that, on ex-cash dividend days, open
limit orders to buy stocks are reduced by the cash dividend amount. With discrete
prices, if the resulting price is not a tick multiple, it is further lowered to the next tick.

Prices in limit sell orders are not changed"


dubofsky and haite did a paper debating the effects of the exchange mandated reductions.

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Old 09-23-2012, 09:22 AM   #63
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I think we both agree that the stock price will be affected by the dividend paid. I believe that it is not by regulation but is the natural result of market supply and demand and that investors are aware of when the dividend will be paid. Also, as you indicate any orders placed prior to the payment of the dividend are presumed to be pre-dividend and are adjusted for the dividend paid once the stock goes ex-dividend. Wikipedia indicates the following:

Quote:
It is relatively common for a stock's price to decrease on the ex-dividend date by an amount roughly equal to the dividend paid. This reflects the decrease in the company's assets resulting from the declaration of the dividend. The company does not take any explicit action to adjust its stock price; in an efficient market, buyers and sellers will automatically price this in.
Notice that the above indicates "roughly equal" not "equal". You were suggesting some mechanical intervention in the pricing of a stock by the exchanges that would make it exactly equal (like what happens with a fund since it is based on NAV and cash is part of NAV) and I am suggesting that it is not mechanical, automatic or one-to-one.

Beyond that, I guess we'll have to agree to disagree.
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Old 09-23-2012, 09:23 AM   #64
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but there is no disputing that the two exchange rules mandate that drop. it may not be to the penny but close enough.

if it didnt work that way we could just be ahead by buying a stock the day of record and then collecting the dividend like bank interest.

the exchanges make sure that doesnt happen by having those 2 rules in place. where they trade after the open is all investor sentiment.

its all about total return. selling enough shares from a stock with a total return of 8% to equal a 2% dividend is no different then a dividend payer up 6% with a 2% dividend.

in either case you can have that cash flow .
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Old 09-23-2012, 09:37 AM   #65
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The answer to "What is Life?"

Ha
Brilliant answer - my cash income from securities is 42
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Old 09-23-2012, 09:50 AM   #66
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The dividend discussion is like the movie Groundhog Day.
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Old 09-23-2012, 09:53 AM   #67
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The dividend discussion is like the movie Groundhog Day.
+1 I'm done.
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Old 09-23-2012, 09:56 AM   #68
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i guess if brilliant researchers like dubofsky bail and hite couldnt agree what chance do we have.
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Old 09-23-2012, 11:11 AM   #69
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Yet, even Dubofsky and Hite were able to agree that Neil Armstrong said, "One giant step for a man."
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