Quick Summary
- A Potential Dividend Run Alert was issued for Starbucks Corp. (SBUX), analyzing the phenomenon of stocks rising before their ex-dividend date.
- A Dividend Run is the tendency for a stock price to increase in anticipation of an upcoming dividend payment, offsetting the expected price drop on the ex-dividend date.
- Historical data for SBUX shows a trading strategy of buying shares two weeks before the ex-dividend date and selling the day prior has generated capital gains exceeding dividend payouts in recent instances.
- The upcoming Starbucks dividend is $0.61 per share, with an ex-dividend date of February 14, 2025.
- While past performance isn’t a guarantee, the Dividend Run strategy highlights SBUX as a stock to watch, offering an annualized yield of approximately 2.25%.
Understanding the Dividend Run Phenomenon
A recent Potential Dividend Run Alert was issued for Starbucks Corp. (NASD: SBUX), drawing attention to a fascinating investment concept. This strategy, explored through services like DividendChannel.com’s alerts, focuses on the predictable behavior of stock prices around dividend payment dates.
What is a Dividend Run?
The core idea of a Dividend Run originates from observing how stock prices typically behave on their ex-dividend date. The ex-dividend date is the crucial cutoff; investors must have purchased shares before this date to be eligible to receive the announced dividend.
Theoretically, if all other market factors remained constant, a stock’s price should drop by the exact amount of the dividend on its ex-dividend date. This adjustment is logical: a buyer on or after the ex-dividend date is no longer entitled to that dividend payment, so the stock’s value should reflect that reduction.
💡 However, this introduces a natural upward pressure on the stock price before the ex-dividend date. If a stock only fell on its ex-dividend date without any preceding rise, its value would eventually diminish to zero over time, which contradicts the ongoing profitability and dividend distribution of a healthy company.
Strategies for Capturing Dividend Run Gains
The exact timing for capitalizing on this Dividend Run effect can vary among investors. Some prefer to invest and sell based on specific target dates, while others employ dollar-cost averaging. A common approach involves buying shares shortly before the ex-dividend date, holding them to receive the dividend, and then selling on or after the ex-date.
Alternatively, some investors aim to maximize capital gains by selling the day before the ex-dividend date. This strategy positions them to benefit from the price appreciation that occurs as buyers expect to receive the upcoming dividend. A frequently discussed timeframe for this strategy is to buy approximately two weeks (ten trading days) before the targeted sale date.
Analyzing Starbucks (SBUX) Dividend Run Performance
To illustrate, consider Starbucks’ dividend of $0.61 per share, which went ex-dividend on November 15, 2024. On the preceding trading day, November 14, 2024 (the last day a buyer could be sure of receiving the dividend), SBUX shares closed at $99.23. Looking back ten trading days earlier to October 31, 2024, SBUX shares closed at $97.70.
In this specific two-week period leading up to the dividend, SBUX experienced a price gain of $1.53. This capital gain of $1.53 on the $0.61 dividend demonstrates the potential of the Dividend Run strategy.
📊 A review of Starbucks’ last four dividend payments reveals that this strategy of buying two weeks prior and selling the day before the ex-dividend date has been successful in capturing capital gains in excess of the dividend amount in all four instances. Across these periods, the total Divvy Run capital gains amounted to +$25.83, which surpasses the sum of the dividends paid during that time ($2.32).
The upcoming ex-dividend date for Starbucks is February 14, 2025, with a dividend payment of $0.61 per share. This quarterly dividend is scheduled to be paid on February 28, 2025.
⚡ While no investment strategy can guarantee future results, the historical performance of SBUX’s dividend runs suggests it’s a stock worth monitoring for investors who utilize this approach. Starbucks currently offers an implied annualized yield of 2.25%.
Final Thoughts
The concept of a Dividend Run offers a unique perspective on dividend investing, focusing on potential capital appreciation opportunities around dividend dates. Historical data for Starbucks Corp. (SBUX) illustrates how this pattern has presented potential gains for investors employing specific timing strategies.
For those interested in exploring further dividend opportunities and receiving timely alerts, services focused on dividend analysis can be valuable resources. Understanding the dynamics of dividend dates and stock price movements can be a key component of a diversified investment approach.