Finweek English Edition - - Money Matters -

RE­MEM­BER THAT hot EDS are en­ti­tled to all the ben­e­fits re­ceived by or­di­nary share­hold­ers – in­clud­ing all the div­i­dends. An in­vestor who buys sbkihd now on the JSE at 4000c will re­ceive the full in­terim div­i­dend of 193c/share on 22 Septem­ber re­cently de­clared by Stan­dard Bank. That alone is al­ready nearly 5% on the hot EDS. Add to that the fi­nal div­i­dend of 230c that will be paid in April next year and the div­i­dend yield is more than 10%, while the in­vestor also shares in Stan­dard’s cap­i­tal ap­pre­ci­a­tion, ex­actly like or­di­nary share­hold­ers.

Most of the hot EDS in the list will run un­til May next year, when they’ll be rolled over into new in­stal­ment shares. If the price of the un­der­ly­ing share has im­proved well the in­vestor will re­ceive more of the new hot EDS than his ex­ist- ing share­hold­ing: for ex­am­ple, 110 for ev­ery 100. If the price of the un­der­ly­ing share falls over that pe­riod he’ll re­ceive fewer new in­stal­ment shares.

Keep your eye on the knock­out price. It’s bet­ter to sell hot EDS be­fore the or­di­nary share reaches its knock­out price. By sell­ing, the in­vestor also still re­cov­ers part of the in­ter­est paid to the bank.

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