25

A dividend is a cash disbursement from the company. The value of the company goes down the same amount of the dividend, so it is analogous to having money in a savings account and taking a withdrawal every month. Obviously you are going to have less in the end than if you just kept the money in the account. suppose that I own 10 different stocks, and ...


19

Not necessarily. Your reinvestment has no direct effect on the company. But if there were no dividend, all that cash (that would otherwise go to dividends for all shareholders) would be retained by the company and would have to be invested somehow. XYZ could potentially make a better ROI for you as a shareholder by retaining dividends Those are the ...


10

The problem there is that there's a tax due on that dividend. So, if you wish, you can buy the ETF and specify to reinvest dividends, but you'll have to pay a bit of tax on them, and keep track of your basis, if the account isn't a retirement account.


10

Am I correct in understanding that a Scrip Dividend involves the issue of new shares instead of the purchase of existing shares? Yes. Instead of paying a cash dividend to shareholders, the company grants existing shareholders new shares at a previously determined price. This allows shareholders who join the program to obtain new shares without incurring ...


8

Your intuition is incorrect for two reasons. First, from a tax point of view, reinvestment of dividends are treated as if you got the cash and bought more of the stock yourself. This is true even if the dividends are reinvested for you and you never see the cash. Second, reinvesting the dividends is not the same as the company keeping the cash. If they keep ...


8

I think you are overcomplicating things. In the case of a stock / fund which pays no dividends / interest, your investment automatically 'reinvests' any growth directly into the value of a stock. Assume you buy $10k of shares in a company which pays no dividends. Now assume that for the next ten years, each year the company grows in value by 10%. First, ...


8

No, you are not quite correct. Assume you have a simple bond that costs you $100. There are 2 ways the bond provides you money: It might provide you with interest every month/quarter/year, or it might provide you with a future repayment of, say $105. Either way, this bond would be considered 'fixed income' because the value you receive is not based on ...


7

Good question, here are some possible answers: Its a Good Idea There is probably some validity to the statictics and having money invested, generally speaking, has proven far more valuable than having it sit in a savings account. It tends to reinforce strength Suppose you own two stocks, one that is a great performer, and one that isn't. Generally ...


7

Three major advantages that I can think of (and some of these have been pointed out in comments): Brokerages don't necessarily charge trading fees to automatically reinvest dividends (mine doesn't), so you can avoid trading fees Brokerages may give you fractional parts of stocks if you're reinvesting dividends, so you can have a higher percent of your cash ...


7

Almost all US stock mutual funds pay out the dividends received over the year in a lump sum annually, or in some cases, semi-annually or quarterly. Bond mutual funds (and money market funds) usually pay out the interest payments from the bonds or promissory notes that they hold each month, and these payments are also called dividends (and reported as ...


6

There is a basis for that if you consider the power of compounding. So, the sooner you re-invest the dividends the sooner the time will give you results (through compounding). There is also the case of the commissions, if they are paid with a percentage of the amount invested they automatically gain more from you. Just my 2cents, though the other answers ...


5

It is probably a rounding discrepancy. Try doing the math the other way around: 31.59 / 106.0916 = 0.297761556... . . . which rounds to 0.298. Likewise for your other example, 200 / 191.64 = 1.043623436, which rounds to 1.044. In general I would take the dollar amount as the starting point, because the divided is paid in dollars. You get $X from the ...


5

You can see the marginal tax rate (exclusive of benefit reductions) at this page. Look at the line over $43,953 (for 2014). It says 6.46%. You will be getting T-slips with the amount of dividends received along with an increased amount of income to include on your taxes. This reflects the before tax (gross) amount the company earned. It's called 'grossed ...


5

First, do you get charged a commission or other fee for reinvesting? Second, why would capital gains and dividends be grouped together? If the broker charges you for that run away. As Joe explained, it is done as a courtesy. Doesn't this mean if I sell the stock, the profit will be used to buy that stock right back? No, this is only the capital ...


5

1) When it says "an investment or mutual fund", is a mutual fund not an investment? If no, what is the definition of an investment? A mutual fund is indeed an investment. The article probably mentions mutual funds separately from other investments because it is not uncommon for mutual funds to give you the option to automatically reinvest dividends and ...


5

I think you're taking "fixed income" a bit too literally. They are funds that consist of fixed-income investments. They provide nothing unless you're able to sell for a higher price than you bought, is this correct? When the interest is re-invested, the total value of the fund will increase. So the fund will grow by reinvesting the coupons (all else ...


4

You can see the shares are to 3 digits beyond decimal, but the dollars go out 4, or 1/100 cent. Shares accurate to 1/1000 means it's priced to 1 cent per 100,000 whole shares. You ask why the price is off. I suspect a rounding artefact created by the effect of the shares and dollars invested being divided back to an exact share price.


4

I found this DRIP calculator http://www.dividendchannel.com/drip-returns-calculator/ at a website called "Dividend Channel". However it does not account for tax loss (e.g. the taxes due on gains).


4

I think Fidelity has a very nice introduction to Growth vs Value investing that may give you the background you need. People love to put stocks in categories however the distinction is more of a range and can change over time. JB King makes a good point that for most people the two stocks you mentioned would both be considered value right now as they are ...


4

It would be a variation on "Did they purchase it on the open market on my behalf, or just allocate some of their own units to me?" First up, it appears that you do not understand who "they" is. Your broker handles the dividend reinvestment, not the ETF manager or authorized participant. And your broker doesn't begin to have the authority to "dilute the ...


4

One factor that you didn't mention is that qualified dividends are taxed at a lower rate which is good but they're still taxed so overall, it's detrimental. For a dividend paying stock,.share price must appreciate by the amount of the dividend plus another proportional amount for the tax bite less a proportional amount for the compounding of reinvested ...


4

Consider that qualified dividends are taxed same as long term capital gains. A family grossing as much as $100K will see a 0% rate on their dividends. This raises their basis over time, and reduces their total capital gains at the time the stock is sold. For the typical investor, this makes reinvested dividends potentially a better deal.


3

All of the above are incorrect. The formula for unrealized gains is: unrealized gains = current value - cost basis Your cost basis is the total amount of money you spent to acquire all the property you currently hold. (Cost basis accounting is an incredibly complicated issue; the above link might be a good place to start if you want to learn more about ...


3

You can hold a wide variety of investments in your TFSA account, including stocks such as SLF. But if the stocks are being purchased via a company stock purchase plan, they are typically deposited in a regular margin account with a brokerage firm (a few companies may issue physical stock certificates but that is very rare these days). That account would not ...


3

The main difference between a mutual fund and an ETF are how they are bought and sold (from the investors perspective). An ETF is transacted on the open market. This means you normally can't buy partial shares with your initial investment. Having to transact on the open market also means you pay a market price. The market price is always a little bit ...


3

No, the reinvestment is done as a courtesy. Consider, one can have, say, 100 shares of a $50 stock. A 2% dividend is $100/yr or $25/quarter. It would be a pretty bad deal if brokers charged you even $5 for that trade. When cap gains and dividends are grouped as you suggest, it refers to Mutual Funds. My funds will have a year end dividend and cap gain ...


3

The key is to look at total return, that is dividend yields plus capital growth. Some stocks have yields of 5%-7%, and no growth. In that case, you get the dividends, and not a whole lot more. These are called dividend stocks. Other stocks pay no dividends. But if they can grow at 15%-20% a year or more, you're fine.These are called growth stocks. The ...


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