CBM ex-dividend on 5/4 (55%, special)
Cambrex will pay a special dividend of $14.00 on May 3 to holders as of Friday, May 4. That’s 55% of the share price of $25. However, the biotech service provider will be discontinuing its small quarterly dividend. One quarter of the special dividend will be financed through borrowings under a new five-year credit facility.
April 10th, 2007 at 8:02 pm
So what does everyone think about this HUGE dividend? It seems CBM’s stock price has made a decent run as of late. Will this be one of the pay outs that will take forever to recoup or will the recent run make it a good buy? I’m relatively new to dividend strategies, so any insight would be most appreciated!
April 10th, 2007 at 9:51 pm
Paying dividend by taking on debt is always a red flag IMO…
April 11th, 2007 at 10:15 am
Just buy May Puts on it and rake in some cash. Don’t mess with the stock, for it will be dead money for a long while.
April 11th, 2007 at 3:23 pm
Can someone explain Puts? Does anyone have alternate strategies on how to maximize the returns from this dividend?
April 11th, 2007 at 4:47 pm
The puts will reflect the dividend, but I think the point is the company is now overvalued because of the questionable dividend.
I personally wouldn’t buy May options because I like to have more time for the price to reflect the extra debt the company is taking on.
April 12th, 2007 at 8:22 pm
This is a good stock to play covered calls on as well the calls get eaten by the drop you could make 500$ more off the play. A put is buying a position to the downside of the stock a lot safer than shorting.With the money from the puts buy calls as long out as possible in the money.
April 16th, 2007 at 12:03 pm
Any puts you buy before ex-date will not capture the drop in price from paying the div. I know this for fact, as I lost a pile on it last year on PCH. Do not buy puts to try and catch the $14 reduction in price because of the div.
April 16th, 2007 at 5:28 pm
Reply to “jdl’s” message: What was the reason for your loss on PCH? Were the puts too expensive just before the drop? What the timing off? Looking at last year’s PCH chart, looks like all the factors were right - big drop as expected etc. Could you share your thoughts so we can learn from them? Thanks, Pete
April 16th, 2007 at 11:30 pm
As a newbie to options, is it accurate to assume that the price will drop after the ex-dividend date? It may not be by $14, but something close to it? Let’s say I expect the price to drop by $10 after the ex-div date, would it make sense to buy puts (because I am expecting the price to drop) and sell covered calls (because people buying the calls will not collect)?
April 17th, 2007 at 12:57 pm
In response to Peter Pan—-On Feb 9th 2006 I bought a bunch of PCH Feb. 50 Puts, basically at the money, expecting to capture the 15.00 drop in stock price due to the dividend payout.But on Feb. 10th, the options had adjusted to Feb 35.00 puts, basically STILL AT THE MONEY, so it was a wash. Also that day the stock started to climb, and within a few days of trying to figure out what happened, my options expired worthless. I am telling you this, as embarrassing as it is, to save you some grief. So I ADVISE YOU TO NOT BUY PUTS TO GAIN THE DIVIDEND DROP, PAPER TRADE THIS ONE, AND SEE FOR YOURSELF.
April 17th, 2007 at 5:41 pm
In response to “jdl” again. Thanks very much for your thoughts. I find it amazing that they can just “adjust” a contract YOU ALREADY BOUGHT AND OWNED AT 50 - from 50 to 35 just because of a price drop. Clearly it defeats the whole purpose of a “put”. But I believe you, and i’ll sit this one out - paper is cheaper than cash. Any other pearls of wisdom? Cheers, Pete.
April 18th, 2007 at 11:12 pm
I agree with jdl the only reason to buy puts is if you ride the wave down which is really risky cause they either go up imediately or down imediately. And if you do buy puts or calls always give yourself at least 3 mos+ of time to be right or wrong. One example I can give recently for not putting a div is jimmy dean 15$ went from 47 to 32.00 but post and pre trade and voila it open around 33 ended at 34.50 an is now about 35.50 april contracts havent expired and I guarantee almost any put contracts for april bought before the drop are pretty much worthless. If your new to trading options paper trade and do your homework first dont jump in because bubba had a tip!
April 19th, 2007 at 11:31 pm
I played it as covered call too
April 20th, 2007 at 4:32 am
Hi -
I am new to this, but can someone tell me how the day of record is April 20th and the ex-date is May 4th. Everything I have read says that the ex-date is usually three days before day-of-record. This one (as is DPZ) is after the payout date. What day would you have had to buy the stock to be recorded as the owner for the payout?
Mike
April 21st, 2007 at 9:01 am
CBOE regularly adjust puts and calls contracts to reflect significant drop in price when stocks pay special dividents. So the puts will reflect that change. One must consult www.cboe.com and click on contract adjustments for the security to see how they have adjusted them. There is nothing left to chance or done in error, if it was arbitrage would ensue in great proportions, and you won’t have a chance.
Its mainly a lack of knowledge that leads one to believe they can buy puts, when the stock pays a special divident. The stock is not dropping, its being adjusted, and that is a big difference to know.