How can we figure out the amount of dividends announced which have not gone ex-dividend yet? These are the dividends that we would receive on the payment date if we bought the stock today and then held through the ex-dividend date. Equivalently, how we take the sum of all (announced) dividends with ex-dates in the future?
Currently, DivPSNextQ returns “Sum of all REGULAR dividends with PAY DATES falling in the ongoing quarter”. The desired function would return “Sum of ALL dividends with EX DATES falling into the future”.
I suspect that this may not be possible right now, but may be possible if P123 devs were to tweak “DivPSDays” to allow us to peak into the future for announced dividends.
I became interested in this topic after combing a recent thread on Forward Pharma in which there were some good ideas about adjusting the “proforma” balance sheet for dividends which were paid since the latest report which could result in enormous discrepancies between apparent and actual valuation. Namely, there were a few variations on formulae to downwardly adjust cash piles. For example, here is one which adjusts CashEquivQ by the amount of ALL dividends PAID since last report, e.g.:
Although I’m not sure if #PayDate provides a more accurate picture than #ExDate (since we wouldn’t be entitled to receive the dividend if we bought after the #ExDate even though it hasn’t yet been paid), even something this simple should provide us with a more up-to-date estimate on the balance sheet, especially since special dividends, spinoffs, and returns of capital can be quite significant in relation to market capitalization. Also, it would appears to that the latter two uses of funds fall under the special dividend taxonomy as per S&P Capital IQ.
And I think that line of inquiry naturally leads to the next: what is the amount and timing (components of present value) of announced dividends which have not yet gone ex-dividend? Assuming that we missed the one-time pay-day of FWP and now have adjusted our models to adjust for the apparent valuation gap, how now do we go about anticipating these kinds of special events in the future?
DivLQ gives the best approximation of the next dividend. But future dividends are immaterial to valuation. Let me explain why.
We can use two methods to determine a stock’s value for us: project into the future, or look at present data.
Now when a dividend is paid, the price of the stock goes down by the exact amount paid. So unless we’re planning to hold the stock forever, the amount of money we’ll get for the stock will be the same whether or not a dividend is paid. The only difference is the tax rate if we hold for longer than a year. That’s the future outlook.
If we look at the present, then forthcoming dividends are only important insofar as they indicate a near-future encumbrance on the company’s cash. In other words, the forthcoming dividend acts like an additional item in accounts payable. Perhaps one might add it to the short-term liabilities of a company.
However, we cannot adopt this practice for everything a company does post-earnings announcement. If we want truly accurate present-day evaluations, we’d have to take into account not only future dividends and post-most-recent-quarter dividends, but also stock buybacks, the income from issuing new shares, some fraction of quarterly sales, and so on. We’d have to comb through every press release the company has issued since the last quarter ended and add and subtract numbers to our ratios.
This is clearly impractical, and would mess up our comparisons to other stocks. We live in a world of quarterly earnings reports, and we should try to be comfortable with the fact that while the price of a stock changes by the hour, its fundamentals only change four times per year.
The discussion in the Forward Pharma thread is a good one, and I, for one, am going to flag any stocks with SPECIAL dividends that amount to more than 10% of their total assets and were paid after the most recent reported quarter. But I’m not going to modify my ranking factors to try to take into account the effect of dividend payments on cash. There are too many other things that also affect cash, and I need to learn to live with the fact that I’m dependent on quarterly snapshots for my fundamentals.
IAD is the indicated annual dividend, or the total dividends expected in the next 12 months. And just to be clear, the P123 code for IAD is IAD.
IAD is NOT the amount of announced but unpaid dividends, though. It is generally the most recent regular dividend multiplied by the frequency of regular dividends. There are alternate calculation methods, however, including just a sum of announced dividends. There is no way on Portfolio123 to see only stocks with unpaid announced dividends.
We use IAD to calculate the dividend yield, by the way, so the yield is already forward looking.
In [font=courier new]DivPSDays()[/font] what does the [font=courier new]div_dt[/font] parameter mean?
Does it signify the starting date? If so, does it not overlap the [font=courier new]days[/font] parameter?
From the full description:
DivPSDays(days [,offset,div_type,div_dt, cnt_flag])
...
days: number of days
offset: offset in days
div_type: [#Regular], #Special, #AllDiv
div_dt: [#ExDate] , #AnnDate, #PayDate
count_flag: [FALSE] , TRUE
div_dt is used to signify the three key dates for a given dividend. It determines how dividends are aggregated.
#AnnDate - when the dividend was announced #ExDate - the date up to which the holder would be entitled to receive the divident #PayDate - the date on which the dividend was or would have been received
Hopefully gonna quickly put the issue of adjusting cash piles for unpaid dividends to bed.
According to one entry on GAAP, dividends payments involve two accounting entries:
Furthermore, the Capital IQ data guide says that current liabilities - other (LiabCurOther) contains a credit for “dividends declared”.
So, if we’re using the working capital in ours formulas, this will already includes all dividends announced up to the report’s period date (e.g., PeriodDateQ). It will not, however, includes any dividends announced afterward. But since we’re entitled to receive dividends announced that have been announced since the last report that have not gone ex-div, we need to refrain from removing those from proforma working capital.
I know this maybe seems like the splitting hairs, but Yuval demonstrated how the ability to anticipate special dividends can be equally useful in avoiding suckers as nabbing multi-baggers.
