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Silly Question on Dividend Payments
#1
Please bear with me, I'm really new to this...

I have three stocks that were due to pay out today.
I have all my stocks that pay Dividends enrolled in the DRIP, so it should hit my brokerage account for a hot second then come back out to buy shares or partial shares, incrementing the share counts to the amount earned.

EX:
DOW Payable Date 03/13/2020 Rate 0.70     per share
MAIN  Payable Date 03/13/2020 Rate 0.205   per share
O       Payable Date 03/13/2020 Rate 0.2325 per Share


The totals would have only came out to a couple of Bucks, but its my couple of bucks and I was excited to see this thing work.

I figured I'd see it when I logged into my E-trade this morning, nope, then I figured I'd see it at the end of the trading session, nope.

How does this work??? Somebody better pay up... Smile
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#2
(03-13-2020, 04:17 PM)smullen Wrote: Please bear with me, I'm really new to this...

I have three stocks that were due to pay out today.
I have all my stocks that pay Dividends enrolled in the DRIP, so it should hit my brokerage account for a hot second then come back out to buy shares or partial shares, incrementing the share counts to the amount earned.

EX:
DOW Payable Date 03/13/2020 Rate 0.70     per share
MAIN  Payable Date 03/13/2020 Rate 0.205   per share
O       Payable Date 03/13/2020 Rate 0.2325 per Share


The totals would have only came out to a couple of Bucks, but its my couple of bucks and I was excited to see this thing work.

I figured I'd see it when I logged into my E-trade this morning, nope, then I figured I'd see it at the end of the trading session, nope.

How does this work??? Somebody better pay up... Smile
Not telling you what to do but I'd start calling company CEOs if you don't have it by 5PM  today Smile

I don't DRIP anymore, but yes it is just a couple lines of accounting as the money is paid out and buys a fractional share.  Almost everything in investing world takes a few business days to officially post and transfer ownership of share(s).

Patience Grasshoppa, you won't be rich until early next week.   Smile
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#3
fenders53,
thanks for talking me down... Smile

I'll keep an eye on it and follow up here on Monday... Smile

PS... I know I'm along way from being rich, or even being able to buy dinner at this point, but like a kid with a new train set, I was just anxious to see it work...
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#4
(03-13-2020, 04:34 PM)smullen Wrote: fenders53,
thanks for talking me down... Smile

I'll keep an eye on it and follow up here on Monday... Smile

PS...  I know I'm along way from being rich, or even being able to buy dinner at this point, but like a kid with a new train set, I was just anxious to see it work...

I remember when I first started investing.  It was an exciting time.  I saved money for a few years because you couldn't just invest small money without getting eatin' up by commissions.  No kidding, for years I did side jobs repairing cars in my garage for some extra investing money.  I bought shares in two mutual funds with low minimum requirements. This was before Al Gore invented the internet so I called in most every night and listened to the voice recording for 10 minutes waiting for the updated closing price on my funds.  I'd be up or down like 3 or 15 cents on my 100 shares.  I would have been much better off spending the time in my garage rebuilding a carb for $50 lol.  This was waaay back.  I'm 57 yrs old and semi retired.
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#5
I use E*Trade. When I was DRIPing my dividends, they would have the shares purchased the next day. For example, if I had a dividend come in on Monday, Tuesday my account had the fractional shares. Now for ADRs, it would take about 3 days. BP, BBL, and RDS always were a few days later. If the dividend paid on Friday, you should have the additional stock when the market opens on Monday. And don't knock the fractional shares, before you know it, you'll have a full share purchased this way. I did it this way for many years. It really starts to add up for you.
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#6
The fractional shares will add up. Even starting late, your highest yielding stocks will compound one share from year one into about four shares. Just a round number for a stock that yields 7%. The initial yield and growth of the dividend over the years makes a huge difference of course.

Make sure you keep good tax records if this is a taxable account. Hopefully your broker provides good documentation. Early on mine did not. You can add the fractional shares to your cost basis. You already paid taxes on the dividends so you want to add the REINV DIV to your cost. That first share will have 80 more small quarterly purchases after 20 years. Without records you technically would pay a lot of taxes on that one share when you sell it. This is also a good reason to not keep one share for 20 years. It will turn into too much work someday. Especially if you hold a crazy amount of stocks before your total account justifies it. Ten quality stocks would be sufficient for the amount of money you said you are investing currently.
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#7
smullen,

Congratulations on setting up your DRIPs.

I don't know exactly how your brokerage works but this is how mine, TDAmeritrade, handles DRIPs.

First, it depends on when the company paying the dividend actually transfers the money to their shareholders. Some credit the dividend before or at the market's open, 09:30am EST/DST. Some effect the transfer of the money during the trading day and some do it at the time of the official close of the trading day, 4:00pm EST/DST. Obviously, your broker can't use this dividend money to purchase more shares for your account until it has the money to do so. It's not a charity.

Secondly, the broker determines how much of this dividend money it has to spend to purchase more shares. If only half their customers wish to reinvest, then 50% of the dividend payment is allocated to the reinvestment process. Of course, it knows this beforehand. That is why TDAmeritrade requires you to identify the companies you wish to reinvest before the ex-dividend date which is some days the issuing company specifies before the dividend is to be paid.

It then places a market order for that amount. I'm not sure how they specifically execute that trade but obviously a trade worth potentially millions of dollars is not going to execute all at once without significantly affecting the share price. The "market makers", those firms that are supposed to ensure fair and orderly trading, will assign shares to that order as they are available at whatever price they can agree on. For stocks listed on the NASDAQ exchange, this is done by computer rather than market makers (MSFT comes to mind here). Your broker may actually purchase 10,000 shares at one price, another 2,000 at another price, et cetera. At the end of this, the broker determines what the average price per share this total dividend amount produced and allocates that to each account based on your percentage of the entire amount. In essence (and in simple numbers), if you were to receive $10 in dividends and another investor was to receive $90 in dividends, you would receive 10% of the purchased shares at the average price and the other investor would receive 90% of those shares. It is then credited to your account.

The brokerage firm does not receive those shares directly from the company whose dividends you are reinvesting. It is all done in the open market. Hence, you cannot determine exactly how many shares you will receive nor at what price until the transactions are actually completed. This can work for or against you if the stock is making a major move during the day(s) this reinvestment is actuated. You may have noticed that very recently with this crazy market. For thinly traded stocks (i.e., small cap stocks), it may actually take a couple of days before the process is completed and credited to your account. That's why you should focus on the more liquid-trading stocks (read: larger capitalization with larger trading volumes) for dividend reinvestment. You shouldn't have to worry about this too much unless you're investing in something like "XYZ Vacuum Cleaner Corporation" since most companies that pay a dividend are large enough to facilitate an orderly DRIP process.

So if the broker did not receive the dividend money until late on the pay date or at the close, they cannot purchase any shares until the next trading day(s). You said you are waiting to see what MAIN and O did. So am I. You will probably see it credited at the end of trading on Monday once the whole process is complete. Don't expect to see the reinvestment at the closing prices of Friday due to the volatility. However, it will be somewhere in the range. As I said, sometimes it works out well and sometimes the price isn't as great. Over the long term, these will average out.

If the brokerage is handling your DRIP, you will not see the money pop in to your account and then back out for the reinvestment. On Friday, I saw several other companies with reinvestment "book orders" but without the share count or price per share. This tells me they received the money earlier in the day but the price and quantity did not show up until later in the day after the market closed and all the transactions were completed.

The nice thing about DRIPs is you can purchase fractional shares without thinking about it and over the long term it will really add up.

Good luck with your investing and have patience. Divided growth investing is a marathon and not a sprint.
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