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SDS (Seductive Dividend Stocks)
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Sorry I hide my true identity but I'm a physicist/engineer, native contrarian and idea generator. I am an eclectic dividend investor with motto "In God We Trust, All Others Pay Cash" applied to companies I invest in. I like to read /and read a lot - did you look on my SA photo 8-)? /... More
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  • Surprise, Surprise: Negative Dividends 4 comments
    Jun 24, 2012 8:57 PM

    Common presumption of investors is "dividends cannot be negative". I shared this presumption until I got interesting facts within Dividend Heritage Project (see e.g. seekingalpha.com/instablog/725729-sds-se...).

    Sometimes companies required the payment of assessment fees from their shareholders. These assessment fees are essentially negative dividend amounts and represent an obligation of the shareholders to make payments.

    Some negative dividends were:

    Chicago Milwaukee St. Paul & Pacific (32$ in 1928)

    Wallace Murray Corp (10$ in 1927)

    British Airways PLC (about 10$ in 1987)

    BT Group PLC (about 3$ in 1985 and 1986).

    June 24, 2012

    Added 26 March 2014:

    To some extend so-called rights (www.investopedia.com/articles/stocks/05/... and www.finweb.com/investing/the-rights-offe...) might be considered as negative dividends. Several <European> companies offered rights during 2008-2013 crisis.

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  • AgAuMoney
    , contributor
    Comments (4430) | Send Message
     
    I don't know about the two in the 1920's.

     

    But in modern times, how exactly is a company going to require their shareholder to pay?

     

    I could see them withholding something from a dividend payment. But actually sending a bill to a shareholder doesn't seem possible. Is there something unique about British or commonwealth corps that allows that?

     

    The oldest information I saw for British Airways indicates they paid a dividend in 1987 of at least 4.116 p. There might have been another payment earlier that year.

     

    I didn't bother trying to look up 1986 results for BT Group.
    31 Mar 2013, 06:27 PM Reply Like
  • SDS (Seductive Dividend Sto...
    , contributor
    Comments (3177) | Send Message
     
    Author’s reply » I don't know how technically they did it.
    Another strange example is bonds with negative yield (see Negative Yield on German 2-Year Note at http://on.wsj.com/Vj5Z0K)
    31 Mar 2013, 09:25 PM Reply Like
  • AgAuMoney
    , contributor
    Comments (4430) | Send Message
     
    Negative yield on a bill, note or bond of that type is easy.

     

    They are sold at auction, with the yield at maturity set by the price paid at auction. I'm not sure of the German practice, but the U.S. is to order the bids by least to most discount and go as far down the list as is necessary to fill the auction quantity. Everybody pays that highest discount.

     

    Normally they sell at a discount, giving a positive yield. But if you are willing to pay a premium, so accepting a negative yield, and enough bidders feel that way to buy the entire quantity, then everybody will get a negative yield by paying the lowest premium needed to fill the auction.

     

    So that's easy. Without any additional information, I expect the stock "negative dividend" was simply some form of holdback. Kind of like when BP announced they were paying a dividend but the CEO got called into the Whitehouse and when he came out they announced "no dividend for shareholders!"
    1 Apr 2013, 12:08 AM Reply Like
  • SDS (Seductive Dividend Sto...
    , contributor
    Comments (3177) | Send Message
     
    Author’s reply » I don't know almost anything about bonds. Let me quote from the article in WSJ - "Germany... issued shorter-term treasury bills with a negative yield..." - so I guess the bond prospectus actually says that yield < 0.

     

    Yes under Obama pressure BP had 0 dividend but I didn't pay a penny for "honor" to be BP shareholder (I did own and still have their stocks). In the 4 cases I cited in the blog companies required the payment of assessment fees from their shareholders.
    1 Apr 2013, 01:14 AM Reply Like
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