Trust unit price declines after dividend.

Discussion in 'Trading' started by jasonc, Oct 30, 2006.

  1. jasonc

    jasonc

    I was wondering if it was common for trust units to drop in price the day after the dividend date. So if the dividend got paid to shareholders on record of november 17 then a decline would occur on the next traded day as everyone who wanted to sell after they got the dividend now does.
    thanks jason
     
  2. My theory is that it happens because of the
    fund's NAV adjustment. Since some of it's cash was distributed to the shareholders the NAV of the fund should go down.
     
  3. MTE

    MTE

    It's the same principle as it is with stocks, when companies pay dividends their stock price goes down by the amount of the dividend (holding everything else constant).
     
  4. landboy

    landboy

    If the dividend is say 10 cents, the stock will drop 10 irregardless of market factors ON Ex-Date. If this didn't happen you'd have a good arb opportunity...
     
  5. MTE

    MTE

    I'd have to disagree on that. Sure the stock price will drop by the amount of the dividend on ex-date, but due to other market factors the combined effect may be more or less than the dividend.
     
  6. jasonc

    jasonc

    I understand how the stock price will theoretically drop by the amount of the dividend on that day but i was wondering if the day after that it is common for the shares to continue to fall. I would think most of the public would stay in longer then they might usually to get the dividend so after they have got it is there usually more selling pressure then normal in following few days. Thanks for the replies.
    Jason