Why has my data vendor adjusted the back data for the Qantas special dividend - I thought that no adjustment should be made for dividends?

Generally we do not adjust historical data for dividends. The reason for this is that as soon as a share goes 'ex" one dividend, it theoretically becomes "cum" the next dividend. So, notionally there is a build up of value in the share price as it moves toward the next dividend, then drops to zero on the "ex" date, before starting to build up again. To adjust properly for this is very complex, so most people do not adjust for dividends.

However, there is one exception - special dividends. Special dividends, which are large, create a discontinuity on the chart. Since they are by nature "special", once they are paid there is not a new build up of value in the price afterwards. Also, special dividends are often in the nature of capital returns - it is just that the capital return is being paid as a dividend. This is done because the dividend can be franked and the franking credit is valuable. So, I do adjust for any significant special dividend.

The reason we adjust historical data is so that we can compare prices before and after the event (which may be a special dividend, capital return, split, consolidation, reconstruction, call, bonus issue or rights issue). Take the special dividend on Qantas as an example:

If you bought Qantas on the high day of the week you refer to, you would have paid \$4.25. When the special dividend was received, you received 37c of your purchase price back as a special payment amounting to a capital return (because some of Qantas' capital was paid out to shareholders, reducing its shareholders funds and therefore notionally its capitalisation). So your net adjusted cost was \$3.88 (4.25 - .37). Unless you do this, you would not be making a fair comparison.

Now it gets complicated. The market by convention does not do the calculation correctly. What you should do is reduce every price before the payment by 37c. This is notionally the only truly correct method. However, the market, the ASX, and most software packages and/or data vendors use a factor that is applied to all past data. In the Almax case they used a factor of 0.9046 giving an adjusted high for 210801 of \$3.84455. My software made a slightly different calculation and arrived at \$3.844716.

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