One of the variables many income driven investors consider when developing a dividend based strategy is the trading of shares at or near a company's ex-dividend date. On the ex-dividend date the person who owns the security will be awarded the payment, regardless of who currently holds the stock. After the ex-date has been declared, the stock will usually drop in price by the amount of the expected dividend. That said there are two companies that will be going ex-dividend on August 28.
Goldman Sachs (GS) which closed trading on Monday at $104.66/share, will be going ex-dividend at the close of trading on Tuesday, August 28. The New York, New York firm, which currently yields 1.80% ($1.84), provides investment banking, securities and investment management services, as well as a range of financial services to corporations, financial institutions, governments and high-net-worth individuals worldwide. There are a few things I like about GS at current levels. First, I love the fact that insiders currently hold 6.75% or roughly 33.51 million shares of GS, which in my opinion is a very good thing considering insiders only hold 0.28% of Bank of New York (BK) and only 0.11% of Citigroup (C). The second thing I like about GS is the fact the company has demonstrated strong EPS results in three out of the last four quarters of which GS beat estimates by an average of 36.96% with the only anomaly coming during the September 2011 quarter when GS missed estimates by 425.00%.
Home Depot (HD), which closed trading on Monday at $56.38/share, will be going ex-dividend at the close of trading on Tuesday, August 28. The Atlanta, Georgia firm, which currently yields 2.00% ($1.16), together with its subsidiaries, operates as a home improvement retailer. The company's stores sell building materials, and home improvement and lawn and garden products to do-it-yourself, do-it-for-me (at D-I-F-M) and professional customers. It also offers installation services for D-I-F-M customers. The company's installation programs include products such as carpeting, flooring, cabinets, countertops and water heaters. When it comes to HD, I like the fact the company has demonstrated very nice EPS results in three out of the last four quarters with the only anomaly coming during the April 2012 quarter, when HD only came "in-line" with street estimates. It should be noted that HD surpassed estimates by an average of 8.83% during the remaining three quarters. Comparably speaking, Home Depot has managed to outpace direct competitor Lowe's (LOW) in terms of EPS during each of the company's most recent quarters, as LOW actually missed estimates during the most recent quarter by 7.10%, while HD surpassed estimates by 4.10%.
Potential investors looking to establish a position in either GS or HD should do so with a moderate position and add to that position as dividend and earnings announcements approach. Although all both companies currently have very conservative yields (GS 1.80% and HD 2.00%), there are two larger catalysts I'd watch closely when it comes to either stock. In terms of Goldman Sachs, I'd also watch the behavior of several of the larger financial institutions as secondary variables such as the LIBOR scandal are still fresh in our minds. In terms of Home Depot, one the secondary variables investors should watch closely is the homebuilders, since they rely heavily on both HD and LOW to obtain their tools and supplies.