Centrica’s December 2017 preliminary results statement wasn’t great reading. The company which owns British Gas and a number of other energy-related businesses, reported operating profit down 17% to £1,252m. Earnings were down 22%, earnings per share down 25% and so it went on.
Yet amazingly, Centrica declared a dividend of 12p, unchanged from 2016. The dividend was declared on 22 February 2018 and the stock goes ex-dividend on 10th May with payment on 28th June. Why does this interest people? Because it’s possible to buy the stock to take advantage of the dividend. And when a stock has had a bad year, and produced a weak annual report, its stock price can take a dive which means that its yield – the dividend – looks very attractive. That’s why stocks often rise just before the ex-dividend date, as buyers move in to take a short-term profit. Afterwards, they sell the shares and the share price drifts back down again unless there has been a major change of sentiment in the interim.
Normally dividends belong to whoever owns the stock. But after the ex-dividend date, if you buy the share, you don’t get the next dividend. In the case of Centrica, the stock goes ex-dividend on 10 May 2018. If you buy the share on or after that date, you won’t get the dividend due to be paid out on 28th June. That dividend will go to the person who owned the shares on or before 10th May and you’ll have to wait for the next dividend payment. This is so that the registrar has some hope of sorting out the share register and getting payments to the rightful owner. Read More