Emerson Radio Corp MSN

Buying the stock ex-dividend may be a very profitable trade

[stargazer1]

Buying the stock ex-dividend may be a very profitable trade ..... ..... In respect to cash dividends of stocks which are 25% or greater of the value of the subject security, the ex-dividend date shall be the first business day following the payable date. Emerson Radio Corporation declared an extraordinary cash dividend of $0.70 per common share payable on September 30, 2014 to shareholders of record. The first business day following that would be October 1. I think that would make the ex-dividend date September 29 (Monday). So the stock should open at a price $0.70 below the previous closing price (or it could be that the stock opens $0.70 lower on October 1, but I think it's Monday.) That means that it should open at a price of $1.22 ($1.92 closing price minus $0.70 dividend) ..... ..... Since the company has cash equivalent of $47.9 million and 27.1 million shares, that means that it's intrinsic value is $1.76/share. When a stock opens after having it price lowered by the amount of its dividend, it usually quickly starts rising. It may not rise all the way to its intrinsic value, it may only go up to around $1.60 range, but after a while, it will probably rise toward the $1.76 level, and eventually reach the $2 level as people get comfortable with the stock, especially since it may have another special dividend next year, or sooner, and may also be put up for sale ..... ..... If it starts at $1.22 and reaches $1.60, this would be a +30% rise. $1.76 would be a 44% rise and $2 would be a 64% rise. People can't make money buying a $10 or higher priced stock ex-dividend, but they can make money on a low priced stock, such as a $2 stock. This might not work if the stock is weak and has problems. Our stock has problems, but I think that all things considered, it is a fairly good stock. If the stock opens low enough I will buy more shares, whether that is today or October 1.