Analyzing Red Rock Resorts’ Upcoming Dividend Run
This morning, a “Potential Dividend Run Alert” was issued for Red Rock Resorts Inc (NASD: RRR) through the DividendChannel.com Dividend Alerts service, a free feature that provides email notifications. Let’s delve into the details behind this alert.
Understanding Dividend Runs and Ex-Dividend Dates
So, what exactly is a “Dividend Run”? This term was introduced at a past ValueForum conference and relates to how stocks behave around their ex-dividend dates.
The ex-dividend date is crucial for investors; it’s the day when new buyers of the stock can no longer receive the upcoming dividend. To receive the dividend, shares must be purchased before this date. Normally, stock prices are expected to decline by the dividend amount on the ex-date, assuming nothing else influences the stock’s price. This is logical—if a buyer would receive a $0.25 dividend before the ex-date, yet not after, a price drop is to be expected. If the stock price remained the same after the ex-date, new buyers would inadvertently pay $0.25 more for the same share.
Consider this: if stocks are expected to drop on the ex-dividend date, shouldn’t they rise beforehand? If a stock consistently fell without any price increase due to dividend expectations, it would eventually lose all value, which contradicts the notion of a profitable company distributing dividends. Thus, a built-in “pressure” to rise can develop leading up to a dividend—resulting in a “Dividend Run.”
Differing Strategies Among Dividend Investors
Investors have varying opinions on when to capture Dividend Run effects. Some focus on target dates for buying and selling, while others prefer strategies like dollar-cost averaging. A common approach involves purchasing shares just before the ex-dividend date, holding until after, and then selling to capture the dividend income. On the other hand, some might sell the day before the ex-date to maximize capital gains, typically hoping to buy back shares around two weeks beforehand.
Take the recent RRR dividend of $0.25, which went ex-dividend on 06/14/24. The last trading day before this was 06/13/24, with shares closing at $52.56. Observing the previous two weeks, on 05/30/24, shares closed at $49.75. During this period, RRR saw a price increase of $2.81 leading up to the dividend announcement.
Reviewing Recent Dividend Performance
Examining RRR’s last four dividends reveals that employing this strategy resulted in higher capital gains than the dividend amount three out of four times. The total capital gains from these runs reached +$3.7, exceeding the total dividend payouts of $1.75. Here’s a breakdown:
| Ex-Dividend Date | ——Price 2 Weeks Prior—— | ——Price 1 Day Prior—— | Run Gain/Loss | |||
|---|---|---|---|---|---|---|
| 09/16/24 | 0.25 | 08/29/24 | 57.78 | 09/13/24 | 54.20 | -3.58 |
| 06/14/24 | 0.25 | 05/30/24 | 49.75 | 06/13/24 | 52.56 | +2.81 |
| 03/14/24 | 0.25 | 02/28/24 | 56.74 | 03/13/24 | 57.29 | +0.55 |
| 02/21/24 | 1 | 02/05/24 | 54.06 | 02/20/24 | 57.98 | +3.92 |
| Total Dividends: | 1.75 | “Divvy Run” Total: | +3.7 | |||
What’s Next for Red Rock Resorts?
In approximately two weeks, Red Rock Resorts Inc (NASD: RRR) will go ex-dividend for another $0.25/share distribution. Will history repeat itself this time?
Upcoming Dividend: 0.25/share
Ex-Div Date: 12/16/24
Payment Date: 12/31/24
Dividend Frequency: Quarterly
Full RRR Dividend History »
While past performance isn’t a guarantee of future results, investors watching Dividend Runs should certainly keep an eye on RRR, which boasts an implied annual yield of 2.00%.
Stay tuned for more Dividend Run candidates, and to receive alerts directly in your inbox, enroll in our complimentary Dividend Alerts feature from DividendChannel.com.
Also see:
• Funds Holding NNOX
• Institutional Holders of DTO
• CURB Past Earnings
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
