E Split Corp T.ENS

Playing the ENB ex-dividend

[Obscure1]

cttglvr: 

ENB:  I played the ENB  ex-dividend date game for about 3 years before the ENB mgmt down grades their guidance for growth to 5% to 7%. I would SELL just before ex-divi and then wait until the ENB share price dropped by "too much" before buying back.  It was a great way to essentially double the yield for ENB.  The pattern existed because the pros would manipulate the share price knowing that ENB has many investors (retail and institutional) who have held for years and won't sell because it would trigger large capital gains.  

Would I buy ENB for the runup before the ex-divi date?  Maybe. I never did but there is typically a bit of a runup as the dividend hunters get agressive.  If you try it out, make sure that you are OUT before the ex-divi date.  The silly part is that when ENB goes ex-divi, the price gets smacked 2+ times the divi itself so the strategy of grabbing the divi doesn't make sense.  The reason players keep playing the game is that they know that ENB share price almost always recovers within a couple of weeks of going ex-divi. 

ENS: While the ENB game is very predictable, playing the ENB ex-divi date via ENS is more dangerous.  After ENB goes ex-divi (next date will be Feb 14ish), the price of ENB will drop off hard.  The ENS share typically doesn't follow the ENB share price down because ENS shareholders are typically passive and somewhat asleep at the wheel (sorry to those who are offended by the statement). When the ENB share price drops, the ENS NAV drops with it but even moreso because of the leverage. 

If an ENS shareholder is not paying attention after ENB goes ex-divi, the Premium to the NAV for ENS will jump up during the last couple weeks of the month. 

Middlefield loves it when ENS (or any Split holding for that matter) investors are not paying attention because when the Premium to the NAV gets high enough the fund they do a Raise.  

It is important to keep in mind that fund managers don't do Raises until AFTER the Split has gone ex-divi.  The last ENS RAISE was announced on Monday December 4th.  The timing was not a surprise but the fact that Middlefield changed the rules in regards to selling the Prefs at a discount was a new twist that caught me off guard.  The Premium to the NAV when Middlefield announce the Raise was only 16.44% as opposed to previous Raises that were always done when the Premium jumped over 20%.

Ok, I will get to the point. 

I will be watching the ENS Premium to the NAV carefully after Feb 14th when ENB goes ex-divi.  If the Premium sneaks above 15% it will be time to be on the lookout for another RAISE.  It will be important to be paying attention between the 15th of Feb to the 22nd of Feb.  Knowing that Middlefield is very unlikely to do a Raise within 8 days of month end means that if we reach Feb 22 (Leap Year in 2024) we will have time to sell our ENS before the end of the month. 

Is it worth it to get involved in the trading play?

It depends upon the investor.  For passive investors that are happy to collect 13%, there is no need to bother.  For those like myself who love the game, you can make a nice win by selling before a Raise and buying back afterwards on the cheap.

[Experienced]

Nice analysis Obscure I'm sure you keep all us abreast of the premium during this critical time period....

[cttglvr]

Hi Obscure1. Thanks very much for the detailed response. It is very informative. I sold all ENB shares in my registered accounts. I still hold some in my non-registered account and totally get you about capital gains as my average cost is less than $40. Does the NAV of ENS go up after March 1 when the ENB dividends are paid out or is the dividend irrevelant to ENS NAV and solely based on the

[Obscure1]

"Does the NAV of ENS go up after March 1 when the ENB dividends are paid out or is the dividend irrevelant to ENS NAV and solely based on the price of Enbridge shares." Great question.   Based upon the fact that the Unit NAV consists of all assets, one would think that the actual infusion of cash from the ENB dividend would increase the NAV on the payment date.  However,

[Puma1back]

They should be accruing the dividend from ENB in the declaration month whereas the receipt month is the month following. As such, that actual receipt should be a non-event given they determine the NAV daily.