Investing in Trxade Group (MEDS) Yields Huge Returns Quickly
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Trxade Group, Inc., together with its subsidiaries, owns and operates a business-to-business (B2B) web-based marketplace focused on the pharmaceutical industry in the United States. On March 5th, the stock was trading at $8/share. The next day, the company announced a special dividend of $8/share. Following the announcement, the stock rose 272% over the next three days.
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Special dividends are one-time cash distributions to shareholders. They are typically given out when companies have more cash on hand than they need. This follows sales of assets or times when the company has done far better than expected in terms of profits. Special dividends are effectively profit sharing programs.
The Company issues a special dividend on the award date to shareholders that own the stock before the ex-dividend date. As an investor, you can buy the stock a day before the ex-dividend date, hold through the Record Date, which is usually a day or two later, then sell the stock and still be entitled to the dividend on the pay date, as you owned the stock on the record date and bought before the ex-dividend date.
As a stock owner, you are then given the per share value of the special dividend.
In the case of Trxade Group, their special dividend was the same value as a share of stock. They gave out $8.00 to shareholders for each share of stock owned. So, if you owned 100 shares, you would receive $800 in cash - a 100% return from the share price on March 5th.
There are a variety of ways to trade special dividend events. One could simply buy the stock before the ex-dividend date and sell after the record date. This can be flawed, however, as the value of the stock is reduced by the dividend value on the ex-dividend date at the opening bell.
Another way to trade is to day trade the news and exit before the ex-dividend date. And a final way is to simply buy and hold the stock, if the special dividend is indicative of positive longer term tailwinds for the company.
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