Vanguard Dividends question $$$

[YoungStache]

I have all my portfolio invested in VTSAX and VTIAX. I am wondering if dividends are paid out on a per share basis or as a percentage of the stock value? If it is the former, I would probably want to buy more VTIAX because VTSAX is so high right now, and if the latter, then it doesn't matter.

[frugledoc]

What is your desired asset allocation (US: non US)

Decide on that and then stick to it. 

Personally, I use vanguard all world to avoid having to think about this kind of stuff, but I am a very lazy investor

[MoonLiteNite]

I think it is per a %.
If you pay 500$ worth of one of them, you own say 1 share of a 1$ stock and 2 shares of a .50$ stock, etc, up and down all the costs some with more shares and some with less. Then when those companies pay out their dividends you get that payout of those number of shares.

If each pay you 0.01 per a share, then you make .01$ and .02$.

That would seem like the more logical way to me.

[YoungStache]

I think it is per a %.
If you pay 500$ worth of one of them, you own say 1 share of a 1$ stock and 2 shares of a .50$ stock, etc, up and down all the costs some with more shares and some with less. Then when those companies pay out their dividends you get that payout of those number of shares.

If each pay you 0.01 per a share, then you make .01$ and .02$.

That would seem like the more logical way to me.

If what you are saying is true, then it makes the case for timing the market much more attractive. Are you sure dividends are paid by the share and not by a percentage of stock value? It would then make more sense to buy the cheap index funds to get more shares for dividends

[frugledoc]

You are getting confused.

You cannot tell an index fund is cheap by it's dividend yield.  It is total return (capital gains + dividends) which is important.  Dividends are just a forced sell of some of your capital. So if a fund yields 5% and you have 10k, when the dividend is paid your holding will drop to 9.5k and you will receive a 500 dividend.

The only logical/intelligent way to buy funds cheap is to have an IPS with your asset allocation and rebalancing periodically.

[johnny847]

I think it is per a %.
If you pay 500$ worth of one of them, you own say 1 share of a 1$ stock and 2 shares of a .50$ stock, etc, up and down all the costs some with more shares and some with less. Then when those companies pay out their dividends you get that payout of those number of shares.

If each pay you 0.01 per a share, then you make .01$ and .02$.

That would seem like the more logical way to me.

If what you are saying is true, then it makes the case for timing the market much more attractive. Are you sure dividends are paid by the share and not by a percentage of stock value? It would then make more sense to buy the cheap index funds to get more shares for dividends

I thnk you're missing something here YoungStache. When a stock issues a dividend, the stock price drops by the amount of the dividend.

So if you have 100 shares of VTSAX which are $50 each before the dividend, and then they issue a dividend of $1, then you now have 100 shares of VTSAX which are $49 each. You also have $100 of cash. You still have the same amount of money as before: 49*$100 + $100 = $5000.

[seattlecyclone]

I have all my portfolio invested in VTSAX and VTIAX. I am wondering if dividends are paid out on a per share basis or as a percentage of the stock value? If it is the former, I would probably want to buy more VTIAX because VTSAX is so high right now, and if the latter, then it doesn't matter.

I think you're asking if the dividend yield for VTSAX is different from VTIAX. It is not. Dividends are paid out on a per-share basis, but the dividend per share is higher for VTSAX than VTIAX because the share price is higher. They're two separate classes of the same fund and they pay out the same dividend as a percentage of assets.

[Eric]

I have all my portfolio invested in VTSAX and VTIAX. I am wondering if dividends are paid out on a per share basis or as a percentage of the stock value? If it is the former, I would probably want to buy more VTIAX because VTSAX is so high right now, and if the latter, then it doesn't matter.

I think you're asking if the dividend yield for VTSAX is different from VTIAX. It is not. Dividends are paid out on a per-share basis, but the dividend per share is higher for VTSAX than VTIAX because the share price is higher. They're two separate classes of the same fund and they pay out the same dividend as a percentage of assets.

VTSAX is Total US
VTIAX is Total Int'l

Definitely not the same fund.  For the record, I hate when people just use the symbols.

[seattlecyclone]

Whoops, thanks for the correction.

They're different funds and have different dividend yields, but that should hardly be a reason to pick one over another.

[Proud Foot]

I have all my portfolio invested in VTSAX and VTIAX. I am wondering if dividends are paid out on a per share basis or as a percentage of the stock value? If it is the former, I would probably want to buy more VTIAX because VTSAX is so high right now, and if the latter, then it doesn't matter.

Dividends are declared and paid out on a per share basis.  Using a stock as an example.  Coca Cola (KO) they have an annual dividend of $1.48 based upon their quarterly dividend (0.37) declared on February 16.  It doesn't matter what the market price is on the day the dividend is paid you will still receive $0.37 per eligible share held.  It's the same way with mutual fund as their dividends are just passing along the earnings received during the time period.

[YoungStache]

I think it is per a %.
If you pay 500$ worth of one of them, you own say 1 share of a 1$ stock and 2 shares of a .50$ stock, etc, up and down all the costs some with more shares and some with less. Then when those companies pay out their dividends you get that payout of those number of shares.

If each pay you 0.01 per a share, then you make .01$ and .02$.

That would seem like the more logical way to me.

If what you are saying is true, then it makes the case for timing the market much more attractive. Are you sure dividends are paid by the share and not by a percentage of stock value? It would then make more sense to buy the cheap index funds to get more shares for dividends

I thnk you're missing something here YoungStache. When a stock issues a dividend, the stock price drops by the amount of the dividend.

So if you have 100 shares of VTSAX which are $50 each before the dividend, and then they issue a dividend of $1, then you now have 100 shares of VTSAX which are $49 each. You also have $100 of cash. You still have the same amount of money as before: 49*$100 + $100 = $5000.

Wow what then is the point of dividends if they don't grow your stache???

[MoonLiteNite]

I think it is per a %.
If you pay 500$ worth of one of them, you own say 1 share of a 1$ stock and 2 shares of a .50$ stock, etc, up and down all the costs some with more shares and some with less. Then when those companies pay out their dividends you get that payout of those number of shares.

If each pay you 0.01 per a share, then you make .01$ and .02$.

That would seem like the more logical way to me.

If what you are saying is true, then it makes the case for timing the market much more attractive. Are you sure dividends are paid by the share and not by a percentage of stock value? It would then make more sense to buy the cheap index funds to get more shares for dividends

I thnk you're missing something here YoungStache. When a stock issues a dividend, the stock price drops by the amount of the dividend.

So if you have 100 shares of VTSAX which are $50 each before the dividend, and then they issue a dividend of $1, then you now have 100 shares of VTSAX which are $49 each. You also have $100 of cash. You still have the same amount of money as before: 49*$100 + $100 = $5000.

I fully understand the value drops, but that was not his question?
I think he wants to know WHERE, like not where does the value come from, but where does the number come from.... the dividend comes from? It is a % of each asset allocation from the fund, or is it based on total $ of each asset allocation.

At least that is how i took his question...

edit: as the other person said, is it per a share bases, or a percent :D


edit: wow i re-read that and it sounds so confusing....

[Stimpy]

I thnk you're missing something here YoungStache. When a stock issues a dividend, the stock price drops by the amount of the dividend.

So if you have 100 shares of VTSAX which are $50 each before the dividend, and then they issue a dividend of $1, then you now have 100 shares of VTSAX which are $49 each. You also have $100 of cash. You still have the same amount of money as before: 49*$100 + $100 = $5000.

Wow what then is the point of dividends if they don't grow your stache???

Hey YoungStache,

I dare you to try to find when a dividend has happened on the charts.  I guarantee you won't be able to see when or where.  Dividends do drop the price, but if your going to reinvest them(also known as DRIPing), it doesn't matter as you will now will be purchasing an equivalent amount of shares that will then go up/down with the market.  Overall the dividend if reinvested is part of the compounding and growing of your stache.  And personally I prefer the "bonus" shares I get when I reinvest, as it helps me grow my overall stache that much faster.

An important formula to remember if you have dividends:  Dividends+Market Returns = Total Returns.

[Aggie1999]

Where can one find out when dividends will be paid, the ex-dividend date, etc for a given ETF/fund?

[johnny847]

I think it is per a %.
If you pay 500$ worth of one of them, you own say 1 share of a 1$ stock and 2 shares of a .50$ stock, etc, up and down all the costs some with more shares and some with less. Then when those companies pay out their dividends you get that payout of those number of shares.

If each pay you 0.01 per a share, then you make .01$ and .02$.

That would seem like the more logical way to me.

If what you are saying is true, then it makes the case for timing the market much more attractive. Are you sure dividends are paid by the share and not by a percentage of stock value? It would then make more sense to buy the cheap index funds to get more shares for dividends

I thnk you're missing something here YoungStache. When a stock issues a dividend, the stock price drops by the amount of the dividend.

So if you have 100 shares of VTSAX which are $50 each before the dividend, and then they issue a dividend of $1, then you now have 100 shares of VTSAX which are $49 each. You also have $100 of cash. You still have the same amount of money as before: 49*$100 + $100 = $5000.

I fully understand the value drops, but that was not his question?
I think he wants to know WHERE, like not where does the value come from, but where does the number come from.... the dividend comes from? It is a % of each asset allocation from the fund, or is it based on total $ of each asset allocation.

At least that is how i took his question...

edit: as the other person said, is it per a share bases, or a percent :D


edit: wow i re-read that and it sounds so confusing....

I agree it wasn't his question, but there was a bigger issue I wanted to address.

Some people are under the impression that the dividends are a free lunch. That is, one could buy a stock before the dividend, get the dividend, and then sell all the shares for easy profit. I mean if the dividend is declared before it's issued, then this would be an easy profit making scheme right?

Of course, we know it's not because the share price drops by the dividend amount. But not everyone knows this important part.

And as for YoungStache's actual question on how the dividend amount is calculated, I have some idea but I'm not confident enough to provide an answer. Frankly, I don't really care how the dividend amount is calculated.

[johnny847]

I think it is per a %.
If you pay 500$ worth of one of them, you own say 1 share of a 1$ stock and 2 shares of a .50$ stock, etc, up and down all the costs some with more shares and some with less. Then when those companies pay out their dividends you get that payout of those number of shares.

If each pay you 0.01 per a share, then you make .01$ and .02$.

That would seem like the more logical way to me.

If what you are saying is true, then it makes the case for timing the market much more attractive. Are you sure dividends are paid by the share and not by a percentage of stock value? It would then make more sense to buy the cheap index funds to get more shares for dividends

I thnk you're missing something here YoungStache. When a stock issues a dividend, the stock price drops by the amount of the dividend.

So if you have 100 shares of VTSAX which are $50 each before the dividend, and then they issue a dividend of $1, then you now have 100 shares of VTSAX which are $49 each. You also have $100 of cash. You still have the same amount of money as before: 49*$100 + $100 = $5000.

Wow what then is the point of dividends if they don't grow your stache???

The answer is simple. The point of dividends isn't to grow your stache. The point of dividends is to allow companies to return cash to its owners.

From The Economist

When it buys its shares or pays a dividend, a firm is transferring cash to its owners. In neither case does this alter the underlying value of the firm, which is determined by its expected cash flows and their riskiness. Instead all that happens is that the financial instruments with a claim on those cash flows are reshuffled: the value of the firm’s equity declines, its cash falls (or debt rises) and investors’ cash holdings rise, all by an identical sum. In both cases, owners’ wealth is also unaffected: those who sell shares in a buy-back end up with more cash and fewer shares; those who do not end up with a bigger slice of a smaller pie.

[Stimpy]

Where can one find out when dividends will be paid, the ex-dividend date, etc for a given ETF/fund?

Sometimes it's right on the funds page, but most of the time Googling, or doing a thorough search on the etf/fund site and a bit of time will give you all the information you need.

[SwordGuy]

Is VTSAX really paying those dividends, or are the individual companies in the index paying the dividends?   

I believe it's the latter.  VTSAX is just collecting the dividends and passing them on a quarterly basis - probably after holding on to them for a bit.

[johnny847]

Is VTSAX really paying those dividends, or are the individual companies in the index paying the dividends?   

I believe it's the latter.  VTSAX is just collecting the dividends and passing them on a quarterly basis - probably after holding on to them for a bit.

Yup, the latter.
Specifically in Vanguard's case, they actually use the non qualified dividends to pay for expenses. This in turn increases the portion of dividends that are qualified.