ONGC Dividend Trade

protrade

Well-Known Member
#1
With Saturday’s announcement of ending of Dividend Distribution Tax, there is a very interesting scenario - companies like ONGC, which have a high dividend yield, and which normally pay their dividends in end-February would be incentivized to delay their payment by a month - to April. This delay saves the company humongous money - 20% of the dividend, which in ONGC case could be over 1% of market cap of the company!!

Whether they keep this 1% for the company, or whether they pay it as additional dividend is their choice - but clearly, it makes lot of sense for them to delay their dividends into next year.

The ONGC Feb futures are trading at a 4% discount - factoring that there will be a dividend payment in February. So there is a case to buy the Feb future, which is anyway available at ridiculously cheap rate, and hope that company does sensible thing and delays dividend.
 

protrade

Well-Known Member
#2
Looks like market has finally latched on to this idea. Spread between ONGC shares and futures has now fallen to just ₹0.30 from almost ₹6.00 when I first posted about this!
 

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