Author Topic: Company Shares  (Read 2402 times)

guelphinvestor

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Company Shares
« on: August 16, 2018, 09:42:52 AM »
As an employee, I am able to purchase company shares for a discounted price of $96.
They are worth $100 and pay a 5 per cent dividend.

It is a stable insurance company that has been around for 40 years.

What are your thoughts on having 200k of my 1000k invested in this ?

Since the price does not change, I am treating this as fixed income, although it is slightly more risky.

Dividends are taxed preferentially in Canada, so less tax is paid than on interest.


Cache_Stash

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Re: Company Shares
« Reply #1 on: August 16, 2018, 10:19:22 AM »
Would you buy it if you didn't work for the company?

BicycleB

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Re: Company Shares
« Reply #2 on: August 16, 2018, 10:27:12 AM »
4% is a small discount, so on one hand little reason to make a major shift in your allocations.

5% dividend sounds attractive, but why does the market value the stock so low? Does it have risks that a true bond might not have, such as a higher risk in the event of severe market meltdown?

onlykelsey

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Re: Company Shares
« Reply #3 on: August 16, 2018, 10:29:11 AM »
Would you buy it if you didn't work for the company?
Would you put 20% of your net assets in any single company, more bluntly?

guelphinvestor

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Re: Company Shares
« Reply #4 on: August 16, 2018, 10:39:15 AM »
I would not invest that much in a single company normally, so that is a good point.

It is not that easy to find a 5% dividend these days.

I have some money in dividend ETFs ( ZDV.TO , VDY.TO) so it sounds like I should be investing more there.

Thanks for all of the advice.

YoungInvestor

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Re: Company Shares
« Reply #5 on: August 16, 2018, 10:48:24 AM »
As an employee, I am able to purchase company shares for a discounted price of $96.
They are worth $100 and pay a 5 per cent dividend.

It is a stable insurance company that has been around for 40 years.

What are your thoughts on having 200k of my 1000k invested in this ?

Since the price does not change, I am treating this as fixed income, although it is slightly more risky.

Dividends are taxed preferentially in Canada, so less tax is paid than on interest.

I'm pretty sure I work for the same company, especially with your username.

These are preferred shares which are only available to employees. I think they're a great deal with your normal amount, that you can purchase with an interest-free loan. They're ok outside of that, but I don't really see them as a good deal when I account for the fact that the company not paying dividends would probably coincide with me losing my job.

guelphinvestor

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Re: Company Shares
« Reply #6 on: August 16, 2018, 10:57:11 AM »
The consensus seems to be that I should not be investing so much in the company that also employs me.

Yes, my username is not very anonymous.

guelphinvestor

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Re: Company Shares
« Reply #7 on: August 16, 2018, 11:10:56 AM »
I changed my username, thanks for noticing

talltexan

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Re: Company Shares
« Reply #8 on: August 20, 2018, 10:14:01 AM »
20% sounds really high, but getting that 4% discount is not nothing.

How long are you required to hold it when you buy it at that price? Could cycling it into an index allow you to still pocket the 4%? The dividend only really matters if you are in draw-down phase.

ysette9

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Re: Company Shares
« Reply #9 on: August 20, 2018, 11:29:46 AM »
There are many stock purchase plans out there where you can buy at a discount and then have to hold for six months or longer before you can sell again. If you can just treat this as a money laundering step through while you cycle part of your paycheck, then it is a great way to get a little extra return on your investments. Just be sure to sell as soon as you can and put that into a diversified index fund or similar. Having too much money in any one stock is taking on too much risk without sufficient upside potential.

guelphinvestor

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Re: Company Shares
« Reply #10 on: August 20, 2018, 12:08:24 PM »
I have to keep it 4 years to get the full value.

bwall

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Re: Company Shares
« Reply #11 on: August 20, 2018, 12:14:07 PM »
The biggest risk for owning shares in the company you work for is often overlooked:

A single event, such as an economic downturn, can result in both a huge drop in the share price and job loss. So, at the time you might most need the money from the sale of the shares (or the dividend), might also co-incide with the company's share price drop. In other words, for whatever reason you get laid off might also be the reason the share price drops or dividend goes away.

Thus, owning shares for the company you work for can be very risky.

BicycleB

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Re: Company Shares
« Reply #12 on: August 21, 2018, 04:51:53 AM »
I worked for a large company that, as I understand it, awarded 100% matching of 401k contributions - but awarded the match in company stock that could not be sold for several years. I accumulated four years' max match. Then the company collapsed, erasing over 98% of the match value.

bwall

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Re: Company Shares
« Reply #13 on: August 21, 2018, 12:31:20 PM »
I worked for a large company that, as I understand it, awarded 100% matching of 401k contributions - but awarded the match in company stock that could not be sold for several years. I accumulated four years' max match. Then the company collapsed, erasing over 98% of the match value.

Thank you for making the point better than I ever could.

If management suspects that there is even a whiff of a chance that the stock price will approach zero, as the case with minus 98% price drop, then why not give away the shares willy-nilly in order to keep as many employees on-board as long as possible?


Car Jack

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Re: Company Shares
« Reply #14 on: August 22, 2018, 01:39:13 PM »
I have to keep it 4 years to get the full value.

4 years?!  No Fucking Way!!!

If I was required to hold my ESPP for 4 DAYS, I would extract myself.  I currently get RSU's (sold last Wednesday, miliseconds after being vested) and receive ESPP shares next month which will also be sold in miliseconds.  I'm with a tech company that's often mentioned as one of the most successful and best run in the world along with being one of those rated best to work for.  I would not own a dollar in my company. 

guelphinvestor

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Re: Company Shares
« Reply #15 on: August 23, 2018, 07:11:08 AM »
The share price is constant at $100, so the only risk is that the company dissolves completely.

BicycleB

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Re: Company Shares
« Reply #16 on: August 23, 2018, 11:27:21 AM »
The share price is constant?

This isn't publicly traded stock, with price that varies according to market forces?

RWD

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Re: Company Shares
« Reply #17 on: August 23, 2018, 11:34:46 AM »
The share price is constant at $100, so the only risk is that the company dissolves completely.

So you get $5 dividend on $96 plus an additional $4 when you cash it out after 4 years. 6/96 = 6.25% annual return on investment. That's better than bonds but worse than stocks. If it's actually a guaranteed sure thing then it sounds like a decent deal. I still don't think I'd put 20% of my invested assets in it though.

guelphinvestor

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Re: Company Shares
« Reply #18 on: August 24, 2018, 06:39:30 AM »
Yes, it sounded like a good deal to me, since I would be happy to get 6% return from stocks over the next four years.
I agree though that I should not be investing too much in the company that I work for.