A 50% Dividend ?
I recently bought a stock called Health Management Associates (HMA) when they announced that they would be paying out a special $10 dividend. Since the stock was trading at $19 and change, I thought that would make a neat dividend.
The stock goes ex-dividend tomorrow (well its past midnight so its actually today) and I wonder how much the stock will drop. Will it drop by $10? Maybe less or more?
There were some fluctuations in price this week but its still around $20 which I take is a good sign.
Another issue is the tax consequences. Will it be taxed as a return of principle or as a dividend?
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March 2nd, 2007 at 1:48 am
Dude, you realize that Health Management Associates is being replaced by CH Robinson in the S&P 500 right? That’s happening today actually, which is bad news for the stock since all funds tracking the S&P 500 will need to dump HMA. That coupled with the special ex-dividend today is gonna make this one rocky day for HMA. Good luck!
March 2nd, 2007 at 12:39 pm
It looks like a stock split (aka stock dividend) rather than a cash dividend.
http://stockcharts.com/h-sc/ui?s=hma&p=D&b=3&g=0&id=p65093336279
March 2nd, 2007 at 1:34 pm
the price was adjusted because of the $10 cash dividend.
because of that it lost half its market cap and is now too small to be covered by the S&P500. thats why its being dropped.
surprisingly, its up over 4% today on decent volume! I’d have thought that with index funds selling it, its price would drop.
March 10th, 2007 at 7:15 pm
In fact, the company borrowed money to pay the dividend. In many parts of the world companies can only pay dividends from their reserves (profits), and that makes a lot of sense to me.
Borrow money to get out of the S&P, sounds incredibly stupid and quite dodgy to me.
Source: http://www.businessweek.com/ap/financialnews/D8NK64CG1.htm
March 11th, 2007 at 11:24 am
I agree. they did refinance their debt and they paid the dividend out of the debt too.
however, the fact that the market hasn’t punished their stock price means it made sense. The managers obviously thought it made financial sense to unlock equity in this way.
I think its more of a reward for old stock holders. Doesn’t always make sense to buy a stock for the dividend and then sell shortly after recieving it.
March 17th, 2007 at 8:56 am
very good
downtr