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| *Ostroff, Fair and Company>>>Investing |
Should I exercise stock options b/c the company has announced a future dividend? |
I have approximately 2,125 unexercised stock options with my company. If I exercise them, it will be at a good profit but I hadn't otherwise planned to excercise them. The company has just declared a dividend in the next 30 days for stockholders of record in a future date. The divdend would result in approximately a $3500 payout to me. But, I have heard that stock prices tend to go down after a dividend due to the change in value of the company through the payout of a dividend. Does it make sense for me to exercise the options to benefit from the dividend? You can calculate the answer; if the return from the dividend is greater than the return that your money is now earning, (on the amount of exercise price times number of shares), then yes, exercise and get the dividend. But also realize that if you exercise, you have made an investment in the company, which requires an investment decision, not just a yield calculation. Yes, the stock will go down on record date by the amount of the dividend. Yes you should exercise the stock options. Not because of the dividend thow thats a wash but because you have an instant profit. Worse case exercise then sell. But depending on the rules there may be a time frame before you are allowed to sell. Either way its a good deal exercise them. Good luck. You want to be the owner of the stock on the day of the dividend pay out. Buy the option for the one day it is required for you to be the stockholder of record, then sell it IMMEDIATELY after that day has closed. |
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