Wondering if anyone has tried to play the dividend stripping game on the royalty trusts. The idea is to buy a trust at some point ahead of the x-dividend date, collect the dividend, wait for the trust to move up again, and than sell. You can than use your money for something else (like moving back into a trust that pays monthly). It obviously works best for the trusts that pay on a quarterly basis, because otherwise you're paying too much out in commissions to justify the effort. With a good solid established trust, and a market that seems to be in love with these things right now, there appears to be very little downside. I just worked dividend strips for both SPF.UN and SMN.UN. In the case of SPF I bought for an average 18.08, and sold for 17.98. With a dividend of .70 and trading commissions of .06, that's a .54 gain for a hold of a couple of weeks. With SMN I bought at 10.65 and sold at 10.85. With a dividend of .25 and trading commissions of .06, that's a dividend strip of .39.
Obviously a lot of people do this which is one of the reasons why you see a dramatic drop in the price of the quarterly payors right on the x-dividend date. The key, it seems to me, is to not sell immediately on the x-dividend date, but to wait for a week to 10 days for the stock to move back.
For anyone interested, the quarterly payors are as follows:
Oil and gas: COS, SHN
Reits: LGY, MRT
Commodities: WTE, LIF, TWF, TAY, RSI, SPF
Pipelines: KPC, FCE
Power: TPL, APF, GLH
Operating Businesses: FZR, HAL, NWF, ACF, SMN,
Trust of Trusts: MID
Others: PRT
May be others I missed. Most of them pay on a March/June/Sep/Dec x-dividend schedule. However COS, TAY, and NWF (and maybe some others) are on a different schedule.
I know dividend stripping is a well-established practice with certain blue-chip dividend paying stocks, and with certain preferred shares. I find it interesting that it hasn't been discussed on this board.
Interesting as a side-note that all of the new trusts coming out are monthly payors. Obviously people looking for a monthly income stream are one of the target markets for these IPO's. |
