Mastering the dividend cycle
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ECA Marcellus Trust is an example of an extremely high-dividend stock. Because of its high dividend that comes every three months, the stock moves in predictable cycles. The stock gets bought by dividend miners during the lead-up to a dividend, and then it sells off afterward.
There are about 61 trading days between ex-dividends. The low typically comes sometime between day 21 and day 41 after the ex-dividend date, and the high comes on day 60.
This cycle offers an excellent opportunity to make a fairly predictable profit. Even this last, relatively small upswing was worth nearly 35% if you bought at the halfway point between dividend dates and sold the day before ex-dividend.
It's usually a good idea not to actually take the dividend, because the stock will lose more share price overnight than the dividend is worth. (To take the dividend, you have to own the stock at the start of pre-market trading on the ex-dividend date.)
It's worth pointing out that ECA Marcellus Trust is a risky stock. Its dividend distributions vary depending on the price of natural gas and the output of the wells. The output of the wells declines about 8% per year, and the Trust itself expires in July 2021, at which point the stock becomes worthless. So you can expect the swings to get smaller over time, and the stock's average share price to decline at an accelerating rate.
Still, there's an opportunity here for a well-timed play, and its predictability makes it pretty attractive.
There are about 61 trading days between ex-dividends. The low typically comes sometime between day 21 and day 41 after the ex-dividend date, and the high comes on day 60.
This cycle offers an excellent opportunity to make a fairly predictable profit. Even this last, relatively small upswing was worth nearly 35% if you bought at the halfway point between dividend dates and sold the day before ex-dividend.
It's usually a good idea not to actually take the dividend, because the stock will lose more share price overnight than the dividend is worth. (To take the dividend, you have to own the stock at the start of pre-market trading on the ex-dividend date.)
It's worth pointing out that ECA Marcellus Trust is a risky stock. Its dividend distributions vary depending on the price of natural gas and the output of the wells. The output of the wells declines about 8% per year, and the Trust itself expires in July 2021, at which point the stock becomes worthless. So you can expect the swings to get smaller over time, and the stock's average share price to decline at an accelerating rate.
Still, there's an opportunity here for a well-timed play, and its predictability makes it pretty attractive.
Nota
Extrapolating from recent trading history, I estimate the next peak should be about $1.86, and the one after that about 1.80.
Penafian
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