AIR - Air NZ.

[workingdad]

It is rare to get such a large special dividend. In fact in the last 4 years, there have been 3 large ones (that I can recall):

SKT 2012 - 32c dividend closing price before dividend went ex 5.15. closing price next day 4.86 and then drifted lower on subsequent trading sessions. It recovered less than 2 months later
AIR 2014 - 15.5c dividend closing price before dividend went ex 2.21. closing price next day 2.06 and then fell further on subsequent trading sessions. It recovered less than 2 months later
CEN 2015 -50c dividend closing price before dividend went ex 6.08. closing price next day 5.57 and then fell further on subsequent trading sessions. THE PRICE HAS NOT RECOVERED

What is common here:
1. The price generally falls by the amount of the dividend
2. The price continues to fall in the following trading sessions

I have no idea what will happen with AIR this time round and do not care to speculate.

Can only comment on CEN as a holder but it's SP also jumped 50 odd cents when that divvy was announced. It stands to reason a SP dropping the value of the divvy when it has already had the associated increase surrounding such announcements. Of interest with AIR is it has yet to realize the SP gain. I'm not saying this won't mean a drop of 35c wont happen, just pointing out a variation in the comparison.

[boysy]

But a special dividend was anticipated with AIR the only suprise was the quantum. The guidance outlook overrode the larger than expected special dividend hence no jump on the annual results announcement.

[winner69]

But a special dividend was anticipated with AIR the only suprise was the quantum. The guidance outlook overrode the larger than expected special dividend hence no jump on the annual results announcement.

I would say that at average price of say 222 leading up to the announcement hat 1) 10 cent spec div was built it and 2) F17 earnings had been well signalled and weren't a surprise

Thus i wouldn't expect to see share price to close below 200 this week

All conjecture and speculation anyway as when share price is 150 odd in a years time we wold have got overall this current excitment

[Beagle]

It is rare to get such a large special dividend. In fact in the last 4 years, there have been 3 large ones (that I can recall):

SKT 2012 - 32c dividend closing price before dividend went ex 5.15. closing price next day 4.86 and then drifted lower on subsequent trading sessions. It recovered less than 2 months later
AIR 2014 - 15.5c dividend closing price before dividend went ex 2.21. closing price next day 2.06 and then fell further on subsequent trading sessions. It recovered less than 2 months later
CEN 2015 -50c dividend closing price before dividend went ex 6.08. closing price next day 5.57 and then fell further on subsequent trading sessions. THE PRICE HAS NOT RECOVERED

What is common here:
1. The price generally falls by the amount of the dividend
2. The price continues to fall in the following trading sessions

I have no idea what will happen with AIR this time round and do not care to speculate.

I have seen a big Australian study with heaps of empirical evidence that showed that in most cases shares recovered the dividend paid within a few weeks. Obviously with the size of the dividend this time one would expect it will take a bit longer. Thank you for posting previous experience with AIR which supports my contention that all other things being equal the SP is likely to recover the dividend in about twice as long as normal due to its substaintial size.

[couta1]

But a special dividend was anticipated with AIR the only suprise was the quantum. The guidance outlook overrode the larger than expected special dividend hence no jump on the annual results announcement.

Wrong, the reason the price hasn't jumped much since the results is due to a much higher daily volume than normal due to heavy Insto selling, if that wasn't the case I reckon the price would currently be around the $2.45 mark because remember that retail holders can only control around 10% of all the selling.

[winner69]

I have seen a big Australian study with heaps of empirical evidence that showed that in most cases shares recovered the dividend paid within a few weeks. Obviously with the size of the dividend this time one would expect it will take a bit longer. Thank you for posting previous experience with AIR which supports my contention that all other things being equal the SP is likely to recover the dividend in about twice as long as normal due to its substaintial size.

There are quite a few tax implications in Australia as well which we seem to conveniently forget in NZ

[OldGuy]

For a company - like AIR - that earns a decent profit year after year: If the price didn't soon recover after going ex-divvy, it would eventually reach zero and the yield would be infinitely high. That's why the share price MUST eventually recover some of the value that it loses through the "ex-dividend" process.

You're welcome

[mikeybycrikey]

I don't really understand all the excitement around the price jump after the dividend. It's like the efficient market hypothesis has just gone out the window.

If some here are to be believed, then on Sept 9th, the share price will essentially jump by 20%. Instead of dropping from 225 to 190 as expected, it just going to stay where it is. Because: reasons.

Have you all gone mad?

Mr Market has decided that AIR is currently worth 225. After paying out 35cps, it'll be worth 35 cps less, give or take a few cps.

In the time I've been on this forum, I've seen a lot of excitement about dividends..... and usually the reality has completely failed to live up to the hype. I'm sure this time will be no different.

[couta1]

I don't really understand all the excitement around the price jump after the dividend. It's like the efficient market hypothesis has just gone out the window.

If some here are to be believed, then on Sept 9th, the share price will essentially jump by 20%. Instead of dropping from 225 to 190 as expected, it just going to stay where it is. Because: reasons.

Have you all gone mad?

Mr Market has decided that AIR is currently worth 225. After paying out 35cps, it'll be worth 35 cps less, give or take a few cps.

In the time I've been on this forum, I've seen a lot of excitement about dividends..... and usually the reality has completely failed to live up to the hype. I'm sure this time will be no different.

Completely unknowable, as I've said previously there are many examples where the SP hasn't dropped at all going Ex divvy eg Spark, SCL and PGW come to mind over the last year or so in fact if you recall SKT actually went up substantially after going Ex on its last divvy, so no fixed rules on what a stock like Air will do. As previously stated my personal opinion is the SP will drop around half the divvy amount.

[Jantar]

......
If some here are to be believed, then on Sept 9th, the share price will essentially jump by 20%. Instead of dropping from 225 to 190 as expected, it just going to stay where it is. Because: reasons. ......

I don't think anyone is claiming that the price won't drop . That is a mis-representation of the sentiment. The price will almost certainly drop, even though there are cases on record where it hasn't.

The big questions are: How far will it drop? and; How long will it take to recover?

There is no question that the SP will recover or, as OldGuy pointed out, it won't be long before the dividend is greater than the SP. AIR have indicated a drop in earnings for FY17, down from a record FY16 to what will still be a very very good result. They have also re-affirmed that at least a 20cps annual dividend will continue. At $2.00 or less per share that equates to more than 13% gross dividend.

Putting all this together I am picking that the SP will drop to around $1.92 ex div and may stay around that level until the divi is actually paid, then start a slow recovery to back up around $2.25 in 6 months time.