Phillips 66 Positioned for Potential Dividend Run Ahead
This morning, a “Potential Dividend Run Alert” was issued for Phillips 66 (NYSE: PSX) via our Dividend Alerts service. Let’s delve into the details of this situation.
Understanding the Dividend Run Concept
What is a “Dividend Run”? This term was introduced at a past ValueForum conference. To grasp it fully, we need to understand the behavior of a stock on its ex-dividend date.
The ex-dividend date is significant because it marks the day when new buyers of the stock are no longer eligible for the upcoming dividend. Simply put: to receive the dividend, shares must be purchased before this date.
Typically, it’s expected that the stock price will drop by the dividend amount on the ex-dividend date—assuming all other factors remain constant. If holders were entitled to a $1.20 dividend before the ex-date, and not after, it makes sense for the price to reflect this change. If it did not drop, the buyer would end up paying $1.20 more for the same shares.
Now consider this: if a stock is expected to fall by the dividend amount on the ex-date, shouldn’t it also be anticipated to rise prior to that dividend distribution? If such stocks only dropped on ex-dates, they would eventually lose all value, which contradicts the notion of a company continually generating profits and paying dividends.
Thus, some “pressure” typically builds for a stock to rise leading up to the dividend payout. That’s where the idea of a potential Dividend Run comes into play.
Timing Strategies for Investors
The timeframe for capturing Dividend Run effects varies among investors. Some prefer to invest and sell on specific target dates or utilize a dollar cost averaging strategy. Others buy shares shortly before the ex-dividend date, hold for the dividend, and sell afterward. Alternatively, some choose to sell the day before the ex-date, which is the last opportunity to capture the dividend.
A capital gain-focused approach often involves purchasing shares about two weeks (or ten trading days) before the designated sale date. For instance, consider the $1.15 dividend for PSX that went ex-dividend on February 24, 2025. On the previous trading day, February 21, 2025, shares closed at $128.78, while two weeks earlier, on February 6, 2025, they were priced at $120.82. This reflects a price increase of $7.96 leading up to the dividend.
Reviewing PSX’s Recent Dividend Performance
In reviewing PSX’s last four dividends, an investment strategy based on the Dividend Run captured a capital gain exceeding the dividend on all occasions. The cumulative capital gains amounted to +$28.54, surpassing the total dividend payout of $4.60. Below is the detailed breakdown:
| Ex-Dividend | ——Price 2 Weeks Prior—» | ——Price 1 Day Prior—» | Run Gain/Loss | |||
|---|---|---|---|---|---|---|
| 02/24/25 | 1.15 | 02/06/25 | 120.82 | 02/21/25 | 128.78 | +7.96 |
| 11/18/24 | 1.15 | 11/01/24 | 120.01 | 11/15/24 | 130.91 | +10.90 |
| 08/20/24 | 1.15 | 08/05/24 | 131.64 | 08/19/24 | 139.34 | +7.70 |
| 05/17/24 | 1.15 | 05/02/24 | 143.87 | 05/16/24 | 145.85 | +1.98 |
| Div Total: | 4.60 | “Divvy Run” Total: | +28.54 | |||
Upcoming Dividend Details
In approximately two weeks, Phillips 66 (NYSE: PSX) will go ex-dividend for its latest dividend of $1.20 per share. Will the history of Dividend Runs repeat this time?
Upcoming Dividend: $1.20/share
Ex-Div Date: 05/19/25
Payment Date: 06/02/25
Dividend Frequency: Quarterly
Full PSX Dividend History:
While past performance cannot guarantee future returns, those who consider Dividend Runs as part of their investment strategy may find PSX an appealing stock due to its annualized yield of 4.48%.
Stay tuned for more candidates in the Dividend Run arena as opportunities arise.
The views and opinions expressed herein do not necessarily reflect the views of Nasdaq, Inc.
