I recently posted about the potential to take advantage of seasonal weakness for $NASDAQ:COST. I'm embarrassed to say that I had lost track of them being overdue to offer a special dividend. Since 2015 they have offered a special dividend every 2-3 years.
Let's look at how the special dividend announcements have influenced sentiment and interacted with seasonal behavior. Recall that COST sees November as an incredibly strong month, and December through February and August as weaker months. But what happens when there is a special dividend?
February 2015 - $5 special dividend
May 2017 - $7 special dividend
December 2020 - $10 special dividend
December 2023 - $15 special dividend
This is obviously a very small sample size. In every situation the price has increased to a level greater than the special dividend in between announcement and ex-dividend date, but corrected by payment date, or shortly after. The special dividend that was announced in the middle of the year saw the least impact on seasonality. The February 2015 special dividend saw a less common strong Dec-Feb period, while the December 2020 special dividend was followed by a weaker than normal Dec-Feb period.
I'll conclude that a conservative approach is to take profit in between announcement and ex-dividend and continue to look for an opportunity to capitalize on potential seasonal weakness in the coming months.
Let's look at how the special dividend announcements have influenced sentiment and interacted with seasonal behavior. Recall that COST sees November as an incredibly strong month, and December through February and August as weaker months. But what happens when there is a special dividend?
February 2015 - $5 special dividend
- Price surged $13 (9%) between announce and ex-dividend date
- Dec-Feb period ended 5% higher
- After payment price remained ~$2 higher than close of the announce date until Aug
May 2017 - $7 special dividend
- In between seasonal periods. The prior 2016-2017 Dec-Feb had ended higher.
- Price increased $10 (6%) between announce and ex-dividend date
- Price flattened and then dropped after ex-dividend date
- Price increased briefly after payment and then gapped down until November
- The following 2017-2018 Dec-Feb season ended slightly higher
December 2020 - $10 special dividend
- Price increased $13 (9%) between announce and ex-dividend date
- Price dropped after ex-dividend date and was flat by payment date
- Dec-Feb ended $57 (14.7%) lower
December 2023 - $15 special dividend
- December was trending higher prior to the special dividend announcement
- Price has increased $19 (3%) from announcement
- There are currently 7 trading days until ex-dividend date
This is obviously a very small sample size. In every situation the price has increased to a level greater than the special dividend in between announcement and ex-dividend date, but corrected by payment date, or shortly after. The special dividend that was announced in the middle of the year saw the least impact on seasonality. The February 2015 special dividend saw a less common strong Dec-Feb period, while the December 2020 special dividend was followed by a weaker than normal Dec-Feb period.
I'll conclude that a conservative approach is to take profit in between announcement and ex-dividend and continue to look for an opportunity to capitalize on potential seasonal weakness in the coming months.