I’m currently undergoing yet another stock split in my BMO InvestorLine account. I’m watching closely because I want to make an obscenely huge profit for no effort. (True, I probably won’t: I said I wanted to, not I expected to!) It’s frankly a bit of a mess out there in InvestorLine land this morning. Here’s what I found when my CU stock split.
Massive Dividend Increase Over night!
When I opened the Quotes+ screen for Canadian Utilties, CU, the first thing that greeted me was the awesome news the yield was now over 5%. That was a bit surprising as it was around 2.5% last Friday. It’s almost as if it doubled over the weekend after trading stopped. Strangely, that’s about the same time the stock split. Hmmmmm.
Yes, what I’m looking at is that InvestorLine has updated the price of the stock to the split-adjusted price. But it has not yet updated the Indicated Annual Dividend. So it’s dividing the non-split dividend with the split stock price.
Sadly, there is no increase in dividend. Eventually BMO will correctly halve the indicated dividend and the yield will drop.
I sincerely hope, however, that anyone buying the stock this morning is aware of this error. It might be a big shock to buy a stock at about $38 expecting to get $1.94 per year per share and find you’re only really getting $0.97.
Huge 52-week Minimum and Maximum Gap!
Similarly, the minimum 52-week price has been updated to the lowest post-split price. The maximum 52-week price, though, has not been adjusted for the split. So it looks like the stock has bounced between 31.56 and 75.80 in one year. Not!
Should I Sell Half My Shares Immediately?
This is another place where InvestorLine makes me irritated. According to My Holdings, I still only have my original pre-split number of shares. I could put in a request to sell half of what I should have but I’d be in suspense for a while to see what happened. Would the other half of the split eventually show up credited to my account? It should, as the split was based on a date of record of over a month ago. What would happen to InvestorLine’s calculation of my gain or loss on the shares?
Speaking of which, right now it’s reporting I have a huge loss on my shares! That’s because it is using the non-split-adjusted purchase price as my cost, and the split-adjusted price as my current market value. Silly InvestorLine!
Should I Buy More Shares and Ride the Post Split Surge?
It’s always tempting when a stock emerges still gleaming and fresh from its shell after a split to buy more and try to catch the wave of a sudden increase in value. So I logged in at the start of post-split trading this morning to consider the possibility.
However, in the first half hour of trading, the stock had already surged up 99 cents per share. That’s a 2.7% increase in the price of the shares in less than an hour!
The problem is I missed that wave. Do I think it will continue to climb rapidly? This is a very conservative utility stock. If you take the time to figure out the correct dividend, it’s yielding about 2.5% and that’s shrinking each dollar the shares go up.
Hmmm. How gullible are the buyers? Have they checked out the correct dividend? Are they all trying to make a quick buck off the split? Can I buy and dump for a gain of $1 or more a share within the month?
On the other side, this is a perfectly respectable stock to hold. If I buy and it plummets, I could always wait 10 years before selling. Although a 2-2.5% yield is rather low, CU does increase its dividends fairly regularly. It could improve gradually.
Oh the terrible temptation to play the market rather than invest! I can rationalize this six ways to Sunday if I try.
What Would You Do? Or, Perhaps, What Would Warren Buffet Do?
What about you? Would you buy some CU and try to catch the wave? Would you laugh maniacally and stick like a limpet to your ‘whole market’ index fund ETFs? Please share your opinions with a comment.