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Nikkei 225 Could March to Own Beat on Ex-Dividend Crescendo

Nikkei 225 Could March to Own Beat on Ex-Dividend Crescendo

2017-03-29 02:01:00
David Cottle, Analyst

Talking Points

  • Most of the Nikkei 225 goes ex-dividend on Wednesday
  • 191 stocks out of the total will be in this category
  • This may make for more idiosyncratic trade

Wednesday, March 29 is something of a banner day for Japan’s Nikkei 225 equity benchmark. It’s the day on which a huge number of its component stocks will go ex-dividend.

For the uninitiated, that means that equity buyers on or after this date will not receive the next dividend paid out by the company in question. That privilege will still belong to the seller.

Investors need to buy the dividend-paying stock at least three days before the ex-dividend date to qualify for a payout, which at least partially explains why the Nikkei rose on Tuesday.

Shares can change hands many, many times over the course of a year, or even in a day, so companies need some way of deciding whom to pay the owner’s dividend to. With all its faults, the ex-dividend method is the one they use.

Japan’s ex-dividend date comes just before the end of the business year, which occurs on March 31.

191 stocks out of the 225 blue chips which compose the Nikkei 225 are affected. That’s a very chunky 84% of the total index.

Ex-dividend dates can depress or at least limit stock trading as ex-dividend shares effectively trade without the right to receive dividend payments. If we look at the chart below, we can see that the Nikkei 225 has slipped in the last few sessions. But given US stocks’ own performance over the same period, it is tough to see the ex-dividend data as a decisive trading factor.

Clear influence? Nikkei 225 vs. S&P 500 (30min chart)

Nikkei 225 Could March to Own Beat on Ex-Dividend Crescendo

Chart Compiled Using TradingView

Still, such a large potential ex-dividend trade may prevent the Nikkei from following any US leads quite as closely for the next couple of days.

Would you like to know more about financial market trading? The DailyFX Trading Guide is all yours.

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter: @DavidCottleFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.