Sold vodafone shares 2 days before dividend paid out

the culture of deference

Hi,

I Sold vodafone shares on the 1st June 2011, 2 days before the dividend date of the 3rd June. I then received the dividend as 67 shares in August 2011 as I was still on the shareholders reg.

Now I have a letter from the broker I used demanding the value back of these dividends/shares.

The Share purchase advice states this is the

"final dividend for Y/E 31 March 2011, payable 5th August 2011 to SH reg'd on 3rd June 2011".

I received their cheque in the post for payment for the shares I sold them on the 14th August 2011.


Do I have to hand them back the dividends/shares.

They want to charge me another 25 euro if I do not pay ASAP.

Its a UK number.

Thargor

Thats an interesting one, I have nothing to contribute I just wanted to subscribe to this thread for updates, let us know what happens please.

strmin

1st of June 2011 was ex-dividend day. If you sold your shares on that day you are still entitled for dividend payment. But if you sold before 1st of June, even before market hours, you should refund dividend received.

Seifer

In a mildly related fashion; is there anything to stop you picking up shares a few days before dividends are paid and then selling them after?
Is there an obvious flaw in this attempt to hoover up dividends plan that I'm missing?

soddy1979

Seifer wrote: »

In a mildly related fashion; is there anything to stop you picking up shares a few days before dividends are paid and then selling them after?
Is there an obvious flaw in this attempt to hoover up dividends plan that I'm missing?

Yes - the market capitalisation of the firm will be reduced by the aggregate of the dividend pay out once the ex-dividend date is reached. Holding other factors constant, this should feed into a reduced share price.

strmin

Seifer wrote: »

In a mildly related fashion; is there anything to stop you picking up shares a few days before dividends are paid and then selling them after?
Is there an obvious flaw in this attempt to hoover up dividends plan that I'm missing?

On the ex-dividend date, the stock price is adjusted downward by the amount of the dividend. Considering all taxes on dividends, sometimes its worth doing it other way around, sell before ex-div and buy back next day. Especially if its high yield stock and investor is in higher tax bracket.

SBWife

Seifer wrote: »

In a mildly related fashion; is there anything to stop you picking up shares a few days before dividends are paid and then selling them after?
Is there an obvious flaw in this attempt to hoover up dividends plan that I'm missing?

Dividends will already be priced into the share price when you buy them then when the shares go ex-div the price will go down by the amount of the dividend (all else being equal). The only one who will make excess profits in your plan is whoever does the trades for you.

OP re your Vodofone shares. If you sold them on June 1 after market opening you sold them ex-divi which means you are entitled to the divi payment. Normally settlement is 3 days so you should have still been the shareholder of record on June 3rd. The broker would appear to be mistaken, give them a call and they should be able to clear up the problem.

homer911

SBWife wrote: »

OP re your Vodofone shares. If you sold them on June 1 after market opening you sold them ex-divi which means you are entitled to the divi payment.

If you sell ex-div, you are not entitled to the dividend when it is paid. You must sell cum-div to be entitled to it.

coylemj

According to the Vodafone Investor Calendar, the shares went XD on June 1st, the dividend record date was June 3rd.

You say the shares were sold on June 1st which technically means they were sold XD meaning you are entitled to the dividend. The broker is essentially telling you that you sold the shares cum-dividend so you are not entitled to the dividend i.e. the buyer is entitled to it, hence I would suspect that you will have to hand over the money but it also suggests that the sale took place on May 31st and not June 1st.

On May 31st Vodafone closed at 168.95, on June 1st it closed at 161.55 because of it going XD, the 2011 interim dividend was 6.05p. Would you like to tell us the sterling price at which you sold your holding?

The daily spread for the Vodafone share price on May 31st was 168.45-170.85, on June 1st it was 161.35-164.57. As there was no price overlap over those two trading days you should be able to instantly tell which of these two days the sale of your shares took place. If the sale happened on May 31st then the buyer and not you is entitled to the dividend.

homer911

coylemj wrote: »

You say the shares were sold on June 1st which technically means they were sold XD meaning you are entitled to the dividend. The broker is essentially telling you that you sold the shares cum-dividend so you are not entitled to the dividend

A simple google says otherwise, as per my previous post
http://en.wikipedia.org/wiki/Ex-dividend_date

SBWife

homer911 wrote: »

If you sell ex-div, you are not entitled to the dividend when it is paid. You must sell cum-div to be entitled to it.

That's incorrect what I said is correct.

Think about the other side of the transaction.

If you purchase a share ex-divi you only receive the underlying share not the dividend, the dividend remains with the seller, in this case the OP. The ex stands for EXCLUDING thus the sale does not include the divi, if he had sold the previous day it would have been cum-divi and the sale would have been for both the underlying share and the accrued dividend.

Homer911 - maybe you should look up Wikipedia for the definition of buyer and seller.

coylemj

homer911 wrote: »

If you sell ex-div, you are not entitled to the dividend when it is paid. You must sell cum-div to be entitled to it.

You are completely wrong, even that Wikipedia entry you pointed to agrees with me....

It is defined by the IRS as "the first date following the declaration of a dividend on which the buyer of a stock is not entitled to receive the next dividend payment."

Note the reference to the buyer, that is what the term relates to, not the seller. When you sell share XD, the 'ex' refers to the fact that the shares are being sold without the entitlement to the dividend which remains with the seller so the buyer gets the shares for less than what they were going for the previous day but he does not get the dividend.

The Vodafone share price dropped by 6p on June 1st, what you are suggesting is that the person who buys on June 1st when the shares went XD gets both the benefit of the lower price and the dividend which is clearly absurd.

the culture of deference

Thanks for replies guys but I am still none the wiser


NUTSHELL VERSION

Sold vodafone shares on the 1st June 2011

dividend date 3rd June.

received the dividend as 67 shares in August 2011

was still on the shareholders reg.



"final dividend for Y/E 31 March 2011,
payable 5th August 2011 to
SH reg'd on 3rd June 2011".


They have demanded that I send them the value of the 67 shares

AND

They want to charge me another 25 euro if I do not pay ASAP.

strmin

What is exact time of the filled sell order?

SBWife

What price did you receive for the shares?

If the price was ex-divi you need to speak to someone higher up the food chain, then the individual clerk that is dealing with the issue currently. If you received the cum-divi price pay the amount of the divi back.

Tiesto

its really not that difficult. The settlement discipline for UK & Irish securities is T+3 (i.e Delivery is made 3 days after the trade is done.
Record date (on which day you must hold the shares to be entitled to the dividend occurs 2 days AFTER ex-date.
So if you intend on buying an equity to obtain the dividend, the latest possible day you can purchase is EX Date -1(one day BEFORE Ex-date)
So 3 days later, settlement will occur and it will also be record date and your name will be on the companies books to obtain the dividend.

The Ex Date is the first day the equity no longer trades with dividend , the day that you sold your shares, so you are entitled to keep the dividend as the equity was no longer trading with the dividend.

the culture of deference

Tiesto wrote: »

its really not that difficult. The settlement discipline for UK & Irish securities is T+3 (i.e Delivery is made 3 days after the trade is done.
Record date (on which day you must hold the shares to be entitled to the dividend occurs 2 days AFTER ex-date.
So if you intend on buying an equity to obtain the dividend, the latest possible day you can purchase is EX Date -1(one day BEFORE Ex-date)
So 3 days later, settlement will occur and it will also be record date and your name will be on the companies books to obtain the dividend.

The Ex Date is the first day the equity no longer trades with dividend , the day that you sold your shares, so you are entitled to keep the dividend as the equity was no longer trading with the dividend.

I will be calling them today, I really disliked their threatening letters.

coylemj

coylemj wrote: »

On May 31st Vodafone closed at 168.95, on June 1st it closed at 161.55 because of it going XD, the 2011 interim dividend was 6.05p. Would you like to tell us the sterling price at which you sold your holding?

The daily spread for the Vodafone share price on May 31st was 168.45-170.85, on June 1st it was 161.35-164.57. As there was no price overlap over those two trading days you should be able to instantly tell which of these two days the sale of your shares took place. If the sale happened on May 31st then the buyer and not you is entitled to the dividend.

the culture of deference wrote: »

Thanks for replies guys but I am still none the wiser

Can't you just tell us the sell price? That will immediately clarify the issue.

the culture of deference

Sold on the 31st May 2011

selling price 1.6905 stg

strmin

the culture of deference wrote: »

Sold on the 31st May 2011

selling price 1.6905 stg

You should not have received the dividend. Just return it.

coylemj

the culture of deference wrote: »

Hi,

I Sold vodafone shares on the 1st June 2011, 2 days before the dividend date of the 3rd June. I then received the dividend as 67 shares in August 2011 as I was still on the shareholders reg.

strmin wrote: »

1st of June 2011 was ex-dividend day. If you sold your shares on that day you are still entitled for dividend payment. But if you sold before 1st of June, even before market hours, you should refund dividend received.

coylemj wrote: »

The daily spread for the Vodafone share price on May 31st was 168.45-170.85, on June 1st it was 161.35-164.57. As there was no price overlap over those two trading days you should be able to instantly tell which of these two days the sale of your shares took place. If the sale happened on May 31st then the buyer and not you is entitled to the dividend.

the culture of deference wrote: »

Sold on the 31st May 2011

selling price 1.6905 stg

strmin wrote: »

You should not have received the dividend. Just return it.

+1 Why did you tell us in the original post that the sale took place on June 1st, a statement you repeated in your 'Nutshell Version' on Sept 1st?

the culture of deference

coylemj wrote: »

+1 Why did you tell us in the original post that the sale took place on June 1st, a statement you repeated in your 'Nutshell Version' on Sept 1st?

Thats the date on my sale

HobbyMan

Is that the date you sold the shares ( ie the bargain date ) or the settlement date ?

Sounds to me like it's the settlement date as the share price was around 162p when the shares went ex-divi.

coylemj

the culture of deference wrote: »

Thats the date on my sale

When you got the demand to pay back the dividend you should have looked up any share price website, that would have instantly confirmed that your sale could not have happened on June 1st.

The closing price on May 31st was 169p, the opening price on June 1st when the shares went XD was 163p, the difference being the dividend which was 6.05p. You sold at the higher price so clearly you sold the shares 'cum dividend' meaning the buyer is entitled to the dividend.

the culture of deference

coylemj wrote: »

When you got the demand to pay back the dividend you should have looked up any share price website, that would have instantly confirmed that your sale could not have happened on June 1st.

The closing price on May 31st was 169p, the opening price on June 1st when the shares went XD was 163p, the difference being the dividend which was 6.05p. You sold at the higher price so clearly you sold the shares 'cum dividend' meaning the buyer is entitled to the dividend.

Thanks for all your help guy's. Sale date was the 31st July, but they did not process until 1st June, thats why dates were wrong. I also explained their letters were a bit heavy handed. They apologised, and accepted this and I returned the div's to them.


Mod can you closethread please.


Thanks again.