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I just recently set my taxable investment account from reinvest dividends to deposit in cash. However, there seems to be a delay (I assume related to one of the various dates associated with dividends), as some of my dividends are still being reinvested. I am planning to sell multiple positions shortly. Is it possible that some dividends may be received after I have sold all shares? If so, is there a chance they would be reinvested? I'm worried about having to pay a commission to sell a relatively small amount of stock.

  • Yeah, if you sell after ex-dividend but before the payout - you'll get dividends for shares you've already sold. – littleadv Mar 30 '14 at 4:29
  • @littleadv but will they be reinvested? – Craig W Mar 30 '14 at 4:32
  • If the choice was still valid when you got them, probably. – littleadv Mar 30 '14 at 4:34
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I believe this depends on the broker's policies. For example, here is Vanguard's policy (from https://personal.vanguard.com/us/whatweoffer/stocksbondscds/brokeragedividendprogram):

Does selling shares affect a distribution? If you sell the entire position two days or more before the dividend-payable date, your distribution will be paid in cash. If, however, you sell an entire position within the two day time frame of the security's payable date, the dividend will be reinvested, resulting in additional shares. Selling these subsequent shares will require another sell order, which will incur additional commission charges. Dividends which would have been reinvested into less than one whole share will be automatically liquidated into cash.

If you want to guarantee you receive no fractional shares, I'd call your broker and ask whether selling stock ABC on a particular date will result in the dividend being paid in shares.

  • Talked to Fidelity and for them you have to change the setting by the record date, which can sometimes be several weeks before the payment date. So you are correct that it depends on the brokerage. – Craig W Apr 1 '14 at 22:04
  • To update this, Fidelity now says you have to change the setting five days in advance of the record date. – Pacman Dec 1 '17 at 2:11

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