Question for Phaedrus

[Thunder]

I heard that Microsoft will be offering a $3 dividend later in the year. Now if that is true what do you think is going to happen to the price of the stock. I would think that since this is out in the open that everybody would be buying it to snag the three bucks. I could see where the price going up until the payout then a sharp drop off.I was wondering what your take on this would be.

This discussion came up tonight in our investment group...

 

[Phaedrus]

I think MSFT is set to break out of its recent trends.

MSFT has for the most part underperformed the markets this year, but it has good earnings growth (despite a high P:E) and good P:S. The $ 3.00 dividend is no doubt sucking in investors and it might be fun to short MSFT a little after it's been paid, since there will be short-term buyers attempting to maximise short-term gains by adding share appreciation to the big dividend. But I would not count on that downturn being a serious one, or a long-term one, even if it is somewhat predictable that it will happen.

So, really, kind of hard to go wrong with it right now -- buy it for the dividend, sell it for a quick short-term gain, short it thereafter to capitalise on the lemming run out of the stock once the dividend has been paid, and maybe even buy some more once it bottoms after that.


Phaedrus

 

[Thunder]

Thank you Sir...