PRD13 Feb 2022 14:44
With regards to the talk of Special Dividends that has been muted occasionally I came across this -
When a company announces a large special dividend, many investors are initially drawn to the idea of buying shares to get the special payment.
However, this strategy, a derivative of the regular dividend capture idea, is usually not a good idea.
That’s because after the bill due ex-dividend date, the share price will almost always decrease by the special dividend amount. In other words, from a total return perspective you gain nothing from a special dividend, as the total value of your investment is unchanged (you collect the dividend, but the price of your investment decreases by an equal amount).
In addition, you need to remember that a special dividend represents a return of capital to investors, meaning the cash paid out will no longer be available to grow the business.
Any thoughts on the above from those who have experience would be very much appreciated.