Understand the dates of dividends
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.