This morning, a “Potential Dividend Run Alert” was issued for Autoliv Inc (NYSE: ALV) via our DividendChannel.com Dividend Alerts service. Let’s delve into the situation with a keen eye for detail, shall we?
Understanding the Concept of Dividend Run
Let’s start by unraveling the intriguing notion of a “Dividend Run,” a concept that came to light during a ValueForum conference. The ex-dividend date signifies the crucial trading day when a stock buyer is no longer eligible for the stated dividend. Naturally, the stock price is anticipated to decline by the dividend amount on the ex-date, given all else remains constant. If the stock did not exhibit this drop, buyers would effectively be paying more for the shares post-ex-dividend date, which is illogical.
Considering this, wouldn’t it make sense for a stock to rise before a dividend payment? Continual earnings and dividend payouts by a company suggest that there should be a predisposition for the stock to gradually ascend in anticipation of the upcoming cash dividend — a phenomenon referred to as a potential Dividend Run.
Timing and Strategies of Dividend Run
Investors employ various strategies to leverage Dividend Runs, from specific target dates to dollar-cost averaging. Some opt to purchase shares before the ex-dividend date, hold through the dividend payment, and sell post-ex-date to capture the dividend and potential capital gains. Others choose to sell just before the ex-date to maximize capital gain. A common timeframe is purchasing approximately two weeks before the targeted sale date.
For instance, with ALV’s 0.68/share dividend going ex-dividend on 11/27/23, buying two weeks prior would have yielded a capital gain of 7.83. Reflecting on the last four dividends from ALV, this strategy outperformed the dividend total three out of four times, accumulating a “Divvy Run” total of +15.08 in capital gains, exceeding the cumulative dividend amount of 2.66 for those dividends.
Assessing the Future Dividend Prospects
In about two weeks, ALV will go ex-dividend for its upcoming dividend of 0.68/share. The past performance in Dividend Runs is not a guarantee of future outcomes. However, for investors leveraging Dividend Runs, ALV’s implied annualized yield of 2.42% positions it as a favorable dividend stock to monitor and consider.
Keep an eye out for upcoming Dividend Run opportunities, and if you wish to receive timely alerts directly in your inbox, enroll in our complimentary Dividend Alerts service provided by DividendChannel.com.
Also see:
GHIX YTD Return
Top Ten Hedge Funds Holding WPS
Top Ten Hedge Funds Holding GRAY
The views and opinions expressed herein belong to the author and may not align with those of Nasdaq, Inc.
