My remisier told me that the stock price of a company on the ex-date (ex dividend date) will be adjusted accordingly based on the dividend given out. So if the dividend is RM0.07 and the stock price BEFORE the ex-date is RM0.80, then the stock price (opening price presumably) on ex-date will be RM0.73. Question: if this is true, then how can I sell the stock and get the dividend WITHOUT losing out on the stock price? If any gains from the dividend is offset by the decline of the stock price, what's the point of giving out dividends then? Worse, stockholders may end up losing since dividends are subjected to 25% tax unless stated otherwise. So how do I play the dividends game and emerge profitable?

Any advice is most appreciated. Thanks.

This post has been edited by leiwulong90: Sep 14 2009, 11:17 AM

Yes it is true. You don't gain anything if short sighted in dividend play. Short sighted in stock market won't carry you anywhere. No offence.

Please take a bigger and longer view.

If the stock is giving 7 cents constantly annually. If adjusted to 0.73, means at 0.73 it is more attractive thatn 0.80.

7/80 = 8.75% yield

Next year

7/73 = 9.6% yield.

leiwulong90,

The explanation is simple. Dividend play is NOT a game. You do not play dividend stocks with the intention to profit, but you play it to create an alternative source of passive income. Dividend play is NOT for aggressive people like you, but it's for the older people with extra cash and are looking to create a passive source of income for retirement.

So does this help enlighten you?

Thanks buddy for the clarification. Still in the dark about the benefits of dividends. Even if one gains an 8.6% dividend yield, whatever dividends gained will be insignificant because the stock price will be reduced according to the dividends given out. So if BAT gives out 113cents dividend, you won't gain anything because the stock price will be reduced by 113cents on ex-date. Worse, you will lose more money as a result of having to pay a 25% tax for the dividend (unless of course the dividend is tax exempted).

Still don't see the benefits of dividend..would be most grateful if you could shed some light on this..

The fall in the share price after the dividend ex-date is irrelevant to you if you do not intend to sell the share. People who invest in shares for the dividends tend to keep them and collect the dividends year after year. They would only tend to sell if the dividend becomes unattractive to them, relative to their average purchase price for the stock.

The income tax thing is important however. I have long felt that it is extremely unjust that Malaysia doesn't have a capital gains tax to counterbalance the tax on income. In fact, since it is to be expected that many truly wealthy people derive most of their wealth from capital gains rather than income, the lack of this tax makes the tax system in Malaysia very regressive.

Tax deducted for dividend is claimable when you submit your return next year.

I think one of the good reason that capital gain is not taxed is because the government wants to encourage more and more people to invest. Imagine if your KWSP investment is being taxed..no one would like that to happen right?

I see. So people who buy and keep stocks for the dividends hope to get back their ROI in the long term from the dividends alone i.e. buy BAT at RM44 and get back their ROI in 12 years assuming that BAT consistently gives out 300+ cents of dividends every year.

As such,

1) What good dividend stocks would you recommend apart from BAT and BJTOTO?

2) How about REIT? What advantages do REITs offer compared to other non REIT, high-yielding dividend stocks like BAT? Thanks.

3) Is Carlsberg still a good dividend stock? Thanks.

How do I claim when I submit my income tax next year ? Thanks.

you may want to take alook at this thread, specially on dividends talk.
http://forum.lowyat.net/index.php?showtopic=596903&hl=

and Reits talk
http://forum.lowyat.net/index.php?showtopic=479946&hl=reits

This post has been edited by panasonic88: Sep 14 2009, 03:01 PM

As said, if you want to be short sighted, surely you are in dark. I can't help to explain if one views the deduction out the share price then gain nothing, or dividend getting zero or negative return. In fact whenever stocks give good dividend time (announced) its share price has been moving upwards first before come to ex-date.

BAT has been given Rm3.xx year in year out. Even the price being deducted, its price surely will come back up if next year it still paying consistently.

For the last 10 years alone, BAT has been paying no less than Rm20~30 accumulated dividend. So do you see the share price being deducted become penny stocks?

In fact the share price had been surging from 20+ to now 45 for the last 10 years or so, which is excluding what dividend you have received.

That's not a good reason, in my opinion. For KWSP, the government could always include an exception in the tax laws for it. After all, income derived from government issued securities are already tax exempt. For the reason of encouraging investment, arguably the Malaysian economy at the current stage already over-invests and under-consumes. A lack of capital gains tax only exacerbates this. However, my primary reason for strongly supporting a capital gains tax is still that a tax system without it is strongly regressive and hence unjust. It constantly amazes me that poor Malaysians will demand stuff like fuel subsidies, price controls and minimum wages while ignoring the far greater injustice in the lack of capital gains taxes.

Joking aside, it doesn't exclusive to older people. Young people also can have passive income source through dividend.

Actually if younger people know how to have a strategy to have passive income + core income (your core work), then one's wealth can be built more faster and exponantially.

Easier said than done my friend...hahahaha, but every investors is working towards that goal. not easy. I have started investing for 3 years from now....portfolio not doing that great but better than putting in FD i guess...hahahahaha

10 years back, BAT was selling around 28 ~ 33, touching 37 by year end 2000. Stay flat around 36 for a while during 2001. Would have been nice if the dividend really deducted the share price, and it become a penny stock!

So for dividend alone, in 10 years, you get back more or less around 8% dividend of your purchase price annually, plus, the 28 ~ 33 share you buy is worth around 44 ~ 46 today. Now, for a share that you can buy, go to sleep, and smoker cannot seems to find a way to quit, and will keep paying you dividend, how else will you not like this share?

Exclusive to old people? Not necessary...

Like if I want a new handphone, I try not to buy using hard earned cash but buy some dividend stocks & use the dividend to buy it guilt free

Compared to some goreng penny stock that never give a cent of dividend, so no share price deduction and one can save the income tax part , 10 years ago, it was 0.50, now also 0.50.

No offence.

Depending on your tax bracket, if you r being tax for 9% currently, then you can claim back (25% - 9%) 16% from dividend that being taxed 25%.
All this declare under HK4 form (if not mistaken) in your tax return, please check from LHDN website for detail.

Because the Government knows that its cronies will pay alot of tax if capital gains tax is implemented.
PKFZ land: Bought how much, sold how much?
Khir Toyo palace: Bought how much? Next time sell, gain how much?

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Added on September 14, 2009, 5:42 pmWhat happened to the NAPS? Got increase over the years?

This post has been edited by simplesmile: Sep 14 2009, 05:42 PM

http://www.hasil.gov.my/lhdnv3/individuInd...13&expandable=1

So refer to the kadar% in the above website and then use 25 minus the above % ? Correct?

Thanks.

some of the dividend is exclude the tax, because will paid by company...
example: tier interm dividend.

financial year 2009 tax rate is 25%
financial year 2010 tax rate is 24%

I came from a poor background..and I'm glad that my capital gain from stock market investment is not taxed..

cherroy,

Sorry for my previous reply. Didn't mean that it's exclusively for old people. Heck, I'm still young, but I am also starting to build up my passive income

What I meant was that dividend play is more relevant for retirees who want to receive passive income. For younger people, it is wiser to invest in compounding instruments for better exponential growth

Wrong, no offence.

First tier dividend are taxed ay company level before go into the hand of shareholders. Company is belonged to the shareholders, how come can say paid by company?
Part of company is yours! When company is paying then you are the one is paying as well.

In first tier dividend,
You are paying flat rate at corporate instead of individual tax bracket (which for some in much lower than corporate tax level except rich and high earners which reach the maximum bracket as individual highest tax bracket is higher than corporate flat rate level)

I knew that didn't mean that, just joking and pick up the phrase only.

i got another question for all pros here...

is there something to do with the par value of the company with the dividend given??

eg. a 7% DY from a RM 1.00 stock means that i will be getting RM0.07 per stock rite??

its the same with the announcement of a dividend of RM 0.07 from a RM 1.00 stock??

does the par value affect any of these dividend pay out??

Yes, same.

No, dividend ability come from company profit and cashflow.

Par value won't affect the amount of dividend, just how it is being announced in term of %.

Eg.
If a company is making 7 cents profit per share, then it wants to give as dividend, the company can announce as 7 cents dividend or 7% dividend if par value is 1.00 or 14% if par value is 0.50, which is the same.

cherroy,

this means the par value wont affect the dividend in cents (we will get 7 cents per share for either par value stated at 1.00 or 0.5)??

but

it will affect the DY in percentage as u explained....

Div yield = Total dividend/share price

There is no par value involvement in this case.

Bursa really need to get rid of this Par value difference and make all stocks standard RM0.10 par value.

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Turnover 1,964.0 1,947.0 2,036.0 2,772.0 3,010.0 3,073.0 3,199.0 3,236.7 3,564.2 3,612.5 3,830.0 4,135.0
Profit 483.0 629.0 380.0 506.0 607.7 662.9 758.2 782.1 592.8 719.7 731.0 811.0
EPS 169.0 220.0 133.0 177.2 212.8 232.2 265.5 273.9 207.6 252.0 256.3 284.3
Net DPS 154.0 155.0 100.8 170.0 245.4 216.0 310.0 248.4 250.1 254.0 256.5 265.0



10 years (1999 - 2008) total Dividend received = RM23.16
12 years (1997 - 2008) total Dividend received = RM26.25

why?

This looks like BAT's number.

Dear Kamen, if you can include the year high low, or year end closing price for BAT, would have been nice to those people looking at dividend and still thinking about dividend being deducted from the share price.

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Added on September 15, 2009, 12:29 pmA very good example is nestle today.
Dividend went ex today. So, in theory you should have nestle =RM33.92 (closing yesterday) - 0.50 (dividend) = RM33.42

However, Nestle actually trade around RM33.80 now. So, the price is actually +0.38, after ex.
Bring this back to your remisier, and see what kind of knowledge he can feed you..


This post has been edited by plc255: Sep 15 2009, 12:29 PM

Not all remisier or stock broker can be trusted. Sometimes their advise can make you broke. That's why they are called 'broker'.