Hi, can anyone explain how to play the dividend game in the stock market? Today, while going through the ValuePickr forum, I came across a thread about PTC India Ltd. I learned that the company has a dividend policy to distribute 50% of its profits as dividends.
Currently, its TTM EPS is ₹21, but due to a recent divestment, the EPS is expected to rise to around ₹36 in the current financial year. With the stock trading at ₹157, a 50% dividend payout would mean a dividend of approximately ₹18 per share, resulting in a dividend yield of about 11%.
I understand that there’s a concept of the ex-dividend price, where the stock price adjusts after the record date, often nullifying the apparent gain. Essentially, the initial “win-win” scenario tends to become a breakeven.
However, I’m curious if there’s a strategy to profit when companies declare one-off profits as dividends. For instance, Aster DM announced a ₹118 dividend in 2024 when its stock was trading around ₹400, but after the ex-dividend date, the stock adjusted to around ₹350 from the high of 500. Is there a way to navigate such situations to come out profitable?
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I played the dividend game for ASTERDM and failed drastically. I don’t know about others, but this is what happened to me.
Let me explain how it works.
Timeline Breakdown:
• The record date for the dividend was April 23rd (Tuesday), meaning you needed to have the stock in your account on that day.
• The earliest you could sell it was 9:15 AM on April 24th.
• Since the record date was on a Tuesday, the best day to buy the stock (considering T+1 settlement) was Friday, April 19th.
The Numbers:
• You bought the stock at ₹518, assuming a near-low price for that day.
• On April 24th, the best selling price you could get was ₹398.
• Adding the dividend (₹118), your total return was ₹516.
You’re still ₹2 per share short of your cost price.
Now, since this is a “play,” you’d likely buy at least 2,000 shares:
• Your total loss: ₹4,000 + charges.
• If you held it for just one more day, the best price you could get was ₹380, making your loss around ₹40,000.
P.S.: I experiment to learn things the hard way, and this was one of them. Smarter people might know better strategies, but this was just my experience. 
Note: If you by any chance could have bought at the day it was announced you could have strike a better deal. 
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At the end of the day one has to understand the market doesn’t give opportunity to make more than the average return one otherwise would get from the market. The moment any company declares one time huge dividend, the market price for them goes up atleast to around 70-80% immediately and it will be almost 95% when the date of book closure nears. As a result, if someone is trying to make a fast buck after knowing huge dividend is declared, they are only thinking they are the smartest but the market is smarter than anyone else out there.
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