Property Partner pays out dividends on net rental income for properties on the 5th of each month. How does this effect prices and the volume traded on the secondary market? If you’re looking to increase your investments, should you buy in the days leading up to the 5th or directly afterwards? The answer lies in the two contrasting forces:
- Selling Out: People that want to sell, waiting to receive the dividend first. If for example you have £1000 invested in a property that pays a dividend of 3%, as I understand this would give an extra £2.50 if you wait.
- Reinvesting: People looking for a home for their monthly dividend income buying more assets on the secondary market.
To learn more, I’ve looked at the historic open house data supplied by Property Partner. This shows every secondary market transaction between 19th December 2014 and the 3rd July 2016. To calculate a daily share price for a property I used a weighted average of the share prices transactions, weighted by transaction value.
Technical note: To implement this logic I used a SQL database and wrote a SQL view. I’m planning on providing resources on how to do this type of analysis in the coming months as I build out the website. I’d also like to publish interactive reports.
Now I had a weighted share price, per property, per day. I made a simple average of these prices across all properties and plotted per day number for 2015 and 2016:
Property Partner state in their FAQ’s:
Dividends for any given month will be paid on the 5th of following month, directly into your Property Partner account. If the 5th of the month falls on the weekend or a bank holiday, dividends will be paid on the next business day.
Above, we do appear to see a slight decrease in value on the 5th-7th of the month. As per the orange line, we can definitely see an increase in trade volume, usually more shares are being bought and sold on the 5th.
Looking at the aggregates it’s difficult to draw any firm conclusions. The five most traded properties, by number of shares, are:
Here, I’ve plotted the average share price against time for these 5 properties in 2015. The dotted vertical reference lines that pick out some of the 5ths of the months:
For these at least, there did not seem to be dramatic price moves on dividend days. 114 Fairholme Road had a big drop on the 5th October 2015, but this property appears to have had many one day drops.
I set out thinking that there would be some effect of dividend payments on the share prices listed in Property Partner, either positive or negative. However, there was no clear evidence in the data. In 2016, aggregates show a slight price drop on dividend day, but this may well have another explanation. For me, the only noticeable conclusion is that trading volumes rise on the 5th, so there may be better opportunities to make large transactions at the going price on this day. This may suit a large investor that wants to quickly sell out of a particular property, but doesn’t want to move the market too much by listing everything on a quiet day.