Dividend Adjusted Prices

Products Beyond Charts
1

Hi

I have recently switched to investing/trading in ETFs.

Around end June/beginning July high dividend/distribution payouts (or dividend reinvestment) can sharply affect daily prices and since Beyond Charts does not take into account dividends, then scans can close out very (ongoing) profitable positions. For example the weekly relative comparison scan has just closed out (these and other trades)

ETFs I hold

IZZ, MCCL, WCMQ

ETFs I keep an eye on

EX20, F100, IOZ, IVE, MICH, TECH, VAS, VSO

Even though some of these are still trading higher and reaching new highs (on dividend adjusted prices).

Is there any way one could use dividend adjusted prices for stocks/ETFs which can be plotted and analysed? This would remove “false” signals and produce adjusted and more accurate charts (a standout example would be Bollinger Band overlays which are rendered useless if dividend adjusted prices are not used).

I have tried writing BCFL scripts but have not been successful (appears only the last dividend is carried backwards).

Regards Joe Baker

2

Hi Joe,

What methodology are you using to make your buy and sell decisions?

The reason for asking that is that the ETF’s you’ve listed (apart from VAS) are not part of the SPA3 Investor ETF universe.

The SPA3 Investor signals on VAS will capture around 50-60% of the dividends over the longer term, whilst providing protection to the downside.

For the others, you could apply a simple ATR Trailing Stop from the indicator panel to each of the ETF charts, and then experiment with different “up” and “down” multipliers to see the impact that this has over different time frames and market conditions, including dividend “season”.

The dividends on some of the ETF’s listed are quite large and hence the significant drop in price.

The drop in price adds to the volatility of the ETF, and forms part of the normal daily price action upon which Beyond Charts technical indicators and formulae are based, and is not “dividend adjusted”.

3

Hi David

I spend (for enjoyment) about an hour per day to follow and track Australian markets, stocks and ETFs. I am not interested in day trading or holding an ETF on a short term basis. My methodology is medium to long term and I hold ETFs mainly based on SWS daily SIROC scans and weekly relative comparison scans coupled with yearly returns based on dividend adjusted prices.

For example, the eight SWS ETFs (IJH, IJR, IVV, SFY, SLF, STW, VAS and VTS) have an average yearly return of 14% (if brought and held over the past year). Yet over this same period there are several ETFs which have returned three times (CRYP, DFND, ESPO, GDX, IZZ, VBTC) or two times (ASIA, ATEC, BNKS, FANG, HACK, MCCL, WCMQ) that amount. Now, I realise that some of these are speculative and/or follow current market trend, however using Beyond Charts and the online talks by Share Wealth staff, I get a good feel for when one should be in or out of these instruments.

Now in your post you say -
“The dividends on some of the ETF’s listed are quite large and hence the significant drop in price. The drop in price adds to the volatility of the ETF …”

In response I would argue that such changes in volatility are only because the current price does not take into account dividends. However, the volatility would not change if one took them into account (through dividend adjusted prices) - as from an investment viewpoint the overall total value of an ETF does not change because any price drop is offset by the dividend or additional shares through dividend reinvestment. Yet, as I said, if one is using SIROC settings, then ETFs like VAS are stopped out, even though their total value (price + dividend) stays the same or (in the case of VAS) continues to increase.

Again, I would ask if one could adapt Beyond Charts to work with dividend adjusted prices - after all, it does take into considerations stock consolidations and splits.

Regards Joe