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SCMR And $10.00 Special Dividend

|Includes: Sycamore Networks, Inc. (SCMR)

One of my blog readers asked;

Question: For a stock like $SCMR which announce a 10 special dividend on Oct 1. is it worth playing?

Since I was not familiar with this symbol because it's not a regular dividend paying stock, I had to do a little research.

This is my answer;

Thank you for commenting!

Whether you play it or not, you must weigh the risk versus the reward.

Currently, the stock is trading at $15.45 so that is your risk.

The reward is $10 for that risk.

But, there are other considerations; you need to be a holder of record on October 1st, which ordinarily means you must already own the stock 3 business days before, and that is normally on the ex-dividend date.

But, this is a 'special dividend', subject to special rules. The 'ex-dividend' date is actually the day after the dividend is "PAID". Confused? Yeah, me too.

The last time they did this, back on 12/1/10 they declared a $6.50 special dividend, the stock closed almost $6.50 lower than the previous day ($30.01 vs. $25.25), and then closed @ $27.27 on the pay date.

The very next day, the ex-dividend date of 12/23/10, the stock opened @ $20.50 and closed @ $20.82.

Now, consider that the stock had a 3-year high of $34.31 back on 10/15/10, and then went to those price points already described.

I don't know what the price action will be for this latest special dividend, but you should probably check out their website; and other sites as well.

I would recommend and for starters.

So, I can't really tell you if it's worth playing, but if you feel lucky sometimes you just gotta roll the dice. I probably won't take a big bite on this stock, but I might nibble at it a bit. (I just bought 25 shares on a roll of the dice!)

Thanks again, and good luck!

So, was this the right answer? Was it a good answer? I don't know. I took a nibble, though.

We'll seeā€¦