Should you buy ANZ shares before they trade ex-dividend next week?

Should you buy ANZ shares before the bank trades ex-dividend next Monday?

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It's been a promising start to the month of May for the ANZ Group Holdings Ltd (ASX: ANZ) share price. This ASX 200 bank stock began this month at $28.16 a share. But today, those same shares are trading for $29.20 each. That's up a healthy 1.41% today alone and means that ANZ shares have enjoyed a 3.6% rise since the end of April.

It appears investors have given their tick of approval to the half-year earnings report that ANZ delivered earlier this week.

As we covered at the time, these earnings revealed that ANZ suffered a 4% drop in statutory profits after tax to $3.41 billion for the six months to 31 March.

Cash profits also fell by 1%, down to $3.55 billion. However, the capital returns that ANZ announced seemed to give investors their biggest confidence boost.

ANZ revealed that its shareholders would enjoy the benefits of an additional $2 billion share buyback program going forward. The bank also declared an interim dividend of 83 cents per share, which was up 2.5% over last year's interim dividend of 81 cents per share. This fresh dividend will only come partially franked at 65%.

ANZ wasn't messing around, though. The ex-dividend cutoff date for this upcoming payout was set for less than one week later, on 13 May, to be precise. That's next Monday.

Should you buy ANZ shares before next week's ex-dividend cutoff?

This means that anyone who doesn't already own ANZ shares but wants to enjoy this latest dividend has until the close of trading today to buy ANZ shares. Anyone who buys them from Monday onwards (or sells out before today's closing bell) will miss out this time.

Eligible investors will then get the cash from this dividend (or the additional shares if the optional dividend reinvestment plan is utilised) on 1 July.

So those are the rules. But should investors buy ANZ before this dividend disappears forever?

Just to get this straight, there are no free lunches in the investing world. If you buy ANZ shares today as opposed to next Monday, you won't get this dividend 'for free'. Whenever a share goes ex-dividend, you can expect to see its shares fall by roughly the same value as what said dividend was worth.

This latest ANZ dividend is worth 83 cents per share. This effectively means that when ANZ opens on Monday, its share price will be approximately 83 cents lower than where it would have been without the ex-dividend factor.

So you can either buy ANZ shares at a higher price today and bag this dividend, or you can wait until they are cheaper on Monday, but don't come with the rights to the dividend attached. It's fairly close to a zero-sum game, and if any investors try to chase the arbitrage between the two, they will probably come out disappointed.

No free ASX lunches, even for bank stocks

For a long-term investor, it won't make too much difference if you buy today or Monday. Your overall returns probably won't differ by much at all.

So if you were already keen on buying ANZ shares for dividend income, you might want to seize your chance this Friday. But if you are just building out a position in ANZ as a long-term investment, don't let this tricky situation throw you off your game.

At the current ANZ share price, this ASX 200 bank stock sports a dividend yield of 6.08%.

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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