Saturday, March 2nd 2019
Dividend Forecasting: Using Implied Dividends
Dividend forecasting methods using implied dividends and seasonality
ORATS provides a dividend feed for options traders that utilizes historical dividends and implied future dividends from the options markets. The feed is an amalgamation of fundamental analysis, proprietary analysis of historical dividend payouts, seasonal effects, and implied dividends. Implied dividends are a distillation of all research performed by every professional options trader in the industry, and ORATS makes this data available as an easy-to-consume API web call. Implied dividends are a leading indicator for anticipated dividend change and can be used by professional equities traders, analysts, personal investors, or options traders.
ORATS has a hard-to-come-by yet invaluable approach to dividend forecasting.
ORATS provides an unparalleled dividend feed for options traders. We utilize our deep database of historical dividends along with our ability to imply future dividends from the options markets. We partner with top corporate actions provider Wall Street Horizon whose algorithms are continuously scanning the news wires and providing ORATS with updated data. We constantly monitor, verify, and evolve our dividend forecast methods to ensure quality.
Here's SPY and SQM from our dividend forecast file:
SYMBOL EX-DATE AMOUNT FREQUENCY
Our implied dividend is a distillation of dividend assumptions from the options market. The implied dividend calculation is complex and hard to master, so much so that few professionals in the industry attempt it. However, ORATS does all the hard work and makes this data available as an easy to consume API web call.
Consolidated Analysis and Forecasting
ORATS forecasts are an amalgamation of four major models:
- The fundamental analysis performed by our partner Wall Street Horizon.
- ORATS proprietary analysis of historical dividend payouts.
- ORATS model of dividend seasonal effects.
- ORATS implied dividend feed
We then contrast and combine these perspectives to produce the best consolidated forecast we can muster. We continually backtest our predictions to monitor, verify, and evolve our methods and ensure our quality. And lastly, our dividend analysts spot-check the results daily to make sure the feed contains nothing but clean data. The result is, in our opinion and as well as those of our happy customers, one of the best dividend forecast feeds available in the industry.
At the heart of our approach is the use of "implied dividends" - the dividend levels implied by prices within the options markets. In the case of equities that both have dividends and have exchange-traded options on their stock, the dividend price is a major component in the calculation that traders use to compute a fair price for those options. ORATS runs that calculation backwards to compute "implied dividends", a measure that reveals the broad consensus of all players in the options market about how much a company will pay as a dividend along the entire option expiration calendar. Simply put, the implied dividend is a distillation of all of the research performed by every professional options trader in the industry -- you can't ask for a reading much better than that! The implied dividend calculation is complex and hard to master, so much so that few professionals in the industry attempt it. But ORATS does all the hard work and makes this data available as an easy to consume data feed.
The beauty of this is that you don't have to even understand options to make use of our implied dividend feed. Everyone who needs accurate and robust dividend forecasts for any purpose at all - professional equities traders, analysts, personal investors, or options traders to name a few - will find the ORATS feed incredibly useful. Implied dividends are an unparalleled resource for both an alternative price perspective as well as a highly sensitive leading indicator for anticipated dividend change. We update implied dividends throughout the day so that you will be reliably notified when the options markets predict a change in dividends. So whether you are looking for bargains while investing for income or want to be the first to find stocks that are undervalued or overvalued with respect to their dividend, implied dividends can play a key role.
Calculating what the options market implies for a dividend involves lining up the call and put weighted implied volatilities and getting the inputs for interest and dividends consistent.
Implied dividends have foreshadowed cuts by DIS WYNN and other firms. Using options prices to implied dividends ORATS presents a possible suspension list of companies.