Time was when stocks ran up into the Dividend - with people buying the stock for the tax efficiency of dividend on one hand, and to generate a short term capital loss on their equity on the other hand.
Now, it looks like the reversal of tax policy on Dividends has shifted market behavior! Stocks are running up AFTER the ex-date, because investors no longer want the dividend!
A large dividend is actually a negative for a long term investor today - because they pay higher taxes on the dividend, relative to the long term capital gain!
I have seen this trend with Vedanta and L&T - where market actively waited for ex-date to push stocks higher!
Isn’t this strange, how dramatically market behavior changes, with small changes in rules?
Now, it looks like the reversal of tax policy on Dividends has shifted market behavior! Stocks are running up AFTER the ex-date, because investors no longer want the dividend!
A large dividend is actually a negative for a long term investor today - because they pay higher taxes on the dividend, relative to the long term capital gain!
I have seen this trend with Vedanta and L&T - where market actively waited for ex-date to push stocks higher!
Isn’t this strange, how dramatically market behavior changes, with small changes in rules?