Upcoming Dividend Run For FUN?

This morning, a “Potential Dividend Run Alert” went out for Cedar Fair LP (NYSE: FUN), at our DividendChannel.com Dividend Alerts service (a free email alerts feature). Let’s delve into the intricacies of this situation, shall we?

Understanding Dividend Runs

Firstly, what exactly constitutes a “Dividend Run”? This unique concept was first encountered at a past ValueForum conference. To best expound the concept, exploration begins with the expected behavior of a stock on its ex-dividend date.

For the uninitiated, the ex-dividend date signifies the trading day when any purchaser of the stock no longer holds the entitlement to the referenced dividend. In simpler terms, in order to qualify for the dividend, one would need to have procured their shares before the ex-dividend date.

All else being constant, the stock price is expected to drop by the dividend amount on the ex-date. However, it is imperative to bear in mind that various other factors influence the daily fluctuations in stock prices. But hypothetically, the stock should decrease by the dividend amount on the ex-date. This reduction aligns with the logic that if a buyer is entitled to a $0.30 dividend before the ex-date but no longer entitled to that amount on or after the ex-date, then the drop in stock price makes perfect sense. If the shares didn’t decline by the same $0.30 the following day, buyers would effectively be paying $0.30 more for the same stock, which is not rational. As a result, there emerges an inherent pressure for the stock to gradually rise in anticipation of the upcoming cash dividend. This upward movement is referred to as a potential “Dividend Run.”

However, the timeframe for capturing Dividend Run effects is subject to varying perspectives among dividend investors. Some prefer to invest and sell on specific target dates, while others advocate for dollar-cost averaging. Notably, some investors opt to invest shortly before the ex-dividend date, hold for the dividend, and then sell on or after the ex-date to reap dividend income. Conversely, others may choose to sell the day before the ex-date, aiming to maximize capital gain. In this capital-gain-focused scenario, a popular timeframe often discussed involves purchasing approximately two weeks (ten trading days) before the targeted sale date.

Historical Perspective

Considering the $0.30/share FUN dividend that went ex-dividend on 12/05/23, two weeks prior, on 11/17/23, shares closed at a price of $38.31. Subsequently, on the last trading day before the ex-date, 12/04/23, shares closed at $39.49. Thus, in the final two-week run-up to the $0.30 dividend, FUN gained $1.18 in price.

Reviewing the preceding four dividends paid by FUN, this strategy would have captured a capital gain in excess of the dividend three out of four times, with a “Divvy Run” total of +$3.19 in capital gains. Notably, this surpasses the sum total of dividend amounts across the last four dividends, which amounts to $1.20. Here’s the data:

In about two weeks from now, Cedar Fair LP (NYSE: FUN) will go ex-dividend for its latest dividend of $0.30/share. The ex-dividend date is scheduled for 03/05/24. The payment date for the dividend is set for 03/20/24. FUN enjoys a quarterly dividend frequency, presenting an implied annualized yield of 2.82%. It’s apt to mention that past performance is never a guarantee of future returns. Nonetheless, for those investors who include Dividend Runs in their investment arsenal, FUN is indeed a good dividend stock to have on the radar.

Keep an eye out for future Dividend Run candidates, and if you’d like to receive email alerts directly into your inbox, consider enrolling in our free Dividend Alerts feature, courtesy of DividendChannel.com.

Also see:

• Cheap Financial Shares
• Funds Holding FLLA
• DWAS Historical Stock Prices

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.