Tuesday, 6 March 2012

Wed 7 March FTSE100 dividend impact.

Interesting to understand the potential impact (or not) that ex dividends can have on the FTSE (or a.n.other index), as estimated by Reuters (http://www.reuters.com: Ex-divs to take 11 points off FTSE 100 on Weds March 7).
Mon Mar 5, 2012 6:24am EST

LONDON March 5 (Reuters) - The following FTSE 100 companies
will go ex-dividend on Wednesday, after which investors will no
longer qualify for the latest dividend payout. 
    According to Reuters calculations at current market prices, 
the effect would be to take 11.01 points off the index.       
 COMPANY          (RIC)            DIVIDEND         INDEX IMPACT
                                   (pence)           (points)   
 Ashmore Group                       4.25             0.06
 BAT                                88.40             6.72
 CRH                                00.44 euros       1.00 
 Serco                               5.90             0.11
 Shire                               7.96             0.17
 Standard                           51.25 cents       2.95

Just focussing on the largest impact:

BAT's @ 3201p has a market capitalisation of £63.161bn which makes it the 6th largest company in the FTSE100 which represents a weighting of 3.81% of the index's total capitalisation of £1655.788bn.
BAT's final dividend of 88.4p represents 2.76% of BAT's share price (in theory the share price based upon market capitalisation will reduce by the return of capital ie the dividend). 2.76% of BAT's FTSE100 weighting of 3.81% is 0.105%.
So thats a potential impact on the index of 0.105%. 
So to test that, applying 0.105% to yesterday's close of 5874.82 = 6.16 points.
Close enough then (it is a moving picture after all).

Standard Chartered @ 1584.75p has a market capitalisation of £38.752bn which makes it the 12th largest capitalisation on the FTSE100 with a weighting of 2.34%.

The action of returning capital via dividends and the ex.div adjustment to the share price is mechanical so it is useful to understand what impact the ex.dividend adjustment from a number of high yielding large capitalisation companies has on an index. 
Particularly as this is often lost when additional market and company factors and emotions come into play to drive a share price's direction.
Its something I have referred to before (FTSE 100 falls and ex. dividend impacts ) and, in reality, is the FTSE's yield.
I also see that the last time I wrote about it just 2 companies: Royal Dutch Shell and BP, accounted for a 17 point impact on the FTSE100.
As it stands today these 2 companies represent around 14.43% of the FTSE100 so it is easy to see why they have such an effect.
And taking that a step further, if we estimate that holding the FTSE100 yields 3.17% (iShares FTSE100 ETF est. distribution yield), then 5874.82 multiplied by 3.17% means that the FTSE 100 should lose an estimated 186.23 points to ex. dividends across a 12 month period.

Article links:

Previous posts:
- FTSE 100 falls and ex. dividend impacts


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