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Simon Thompson at Investors Chronicle seems to like these 'special dividend' plays. Usually highly discounted to NAV and with the intention of returning cash to shareholders.
I've followed a few of his tips in the past and I know from personal experience that it's possible to get it wrong. My mistake in the past was seeing the special dividend as 'free money'. But be warned, the return to value on ex dividend day can be a killer.
Perhaps there are people more clever than me who can play these situations but my advice is to remember why you invested in ALM in the first place. If you believe that the company is fundamentally undervalued then play the long game.
Good post, however if market price post divis is around 50p, you'd be quids in anyway. Personally I think it should be around 60p, with recent news and director buys. I think there's going to be substantial growth here and this will easily rise above nav figures. At least the BoD is unlocking returns for investors unlike a lot of companies.
I think it's fair to say that a 'special dividend' isn't 'fee money'. It's cash that was held in the company which will be give out to shareholders. So the net effect is that the company will have less cash and is therefore worth less on ex dividend date.
The 'special dividend' is hardly unexpected news and I'm afraid to say that it was largely priced into the 50p share price prior to announcement.
However, I'd expect the share price to continue to rise as we approach 14th Feb and then fall back to a price lower than 50p on ex dividend date. In my experience of other companies paying a special dividend, the share price may then gradually recover to 50p over a period of months. So in the long run you get the benefit of the dividend but it's not as straight forward as some may think.
The reason why investors continue to buy and sell is because market forces still apply with investors trying to second guess how much of the special dividend was already priced into the share and by how much will the share fall after the dividend is paid.
Personally I'm playing the long game with ALM. I'm encouraged to see the BOD are now returning cash to investors and I have confidence that the estimated NAV will be realised over the long term. I am also hopeful that the value of the investments in the portfolio will grow.
when you stand to receive £120K in a month....?