Un­der­stand the dates of div­i­dends

Finweek English Edition - - INSIGHT -

GOOD OR BIG­GER listed com­pa­nies usu­ally de­clare two div­i­dends/ year. Af­ter the com­pany’s in­terim re­sults – that is, the fi­nan­cial per­for­mance of the first six months of the year – are an­nounced an in­terim div­i­dend is de­clared. At the end of its fi­nan­cial year, a fi­nal div­i­dend for the full year is de­clared. The fi­nal div­i­dend is usu­ally a bit big­ger than the in­terim one.

In South Africa, com­pa­nies usu­ally de­clare just less than 40% of their an­nual profit as a div­i­dend. In the case of re­tail­ers it’s much more: up to two-thirds of the profit. Man­u­fac­tur­ers – and es­pe­cially min­ing com­pa­nies, where more money is needed for ex­pan­sion – de­clare a much smaller por­tion of their prof­its as a div­i­dend.

Com­pa­nies in the United States are gen­er­ally much less gen­er­ous with their div­i­dends. For ex­am­ple, War­ren Buf­fett’s well-known Berk­shire Hath­away doesn’t de­clare a div­i­dend at all.

There are three im­por­tant dates about div­i­dends as far as in­vestors are con­cerned.

Let’s take Ton­gaat Hulett as an ex­am­ple. On 30 May it de­clared a fi­nal div­i­dend of 140c/share for its fi­nan­cial year ended 31 March. Along with the dec­la­ra­tion of its div­i­dends Ton­gaat also an­nounced three im­por­tant dates. Last day for trad­ing 8 July 2011 Last day for reg­is­tra­tion 15 July 2011 Date of pay­ment 22 July 2011

For the in­vestor, only the first and last dates are im­por­tant. The fi­nal div­i­dend can be called re­mu­ner­a­tion for the in­vestors for the fi­nan­cial year ended 31 March 2011. But any in­vestor who buys Ton­gaat shares be­fore the JSE closes on 8 July 2011 qual­i­fies for the full div­i­dend. Un­like your em­ployer and the salary he pays, you need not work for (or in­vest in) Ton­gaat for the full year to qual­ify for a div­i­dend. Buy the share a few min­utes be­fore five on the last day – that is, 8 July – and you’ll qual­ify for the full div­i­dend. The date of reg­is­tra­tion is al­ways a week af­ter the last day of trad­ing and is only of im­por­tance for the JSE.

In most cases the com­pany also pays the div­i­dend di­rectly into your ac­count at the stock­bro­ker 14 days af­ter the last day of trad­ing. If you read this be­fore Fri­day, 8 July you could still hurry and buy your­self a few Ton­gaats. They’re trad­ing at 9000c.

It’s not re­ally an out­stand­ing re­turn and I’d wait for some­thing bet­ter later in July, but prob­a­bly early in Au­gust, when there will be plenty of bet­ter op­por­tu­ni­ties.

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