Inherited Verizon Stock

[Farmgirl]

I need some thoughts on what to do with something I recently inherited from my mother.

190 shares of Verizon
3 shares of Frontier Communications

I have my nest egg invested in Vanguard Total Stock and Vanguard Total Bond funds  (70/30 split)

Since I found MMM, I cleaned up my investments from 8 different things to Vanguard in an effort to simplify.

I'm totally ignorant about owning individual stocks. 

Any assistance is greatly appreciated.

[jrbrokerr]

At what price were they bought ?? Also, Verizon has been raising its dividend for quite a few years now, so it could be interesting to take a look at which yield on cost the shares are sitting at as of today... if they are 10+ years old, the yield on cost should be high and I would keep the stock....

good luck

[dandarc]

Sell it all and invest the proceeds in your chosen funds.

Usually you get a step-up in basis to the market value as of the date of the death, so taxes should be pretty minimal if you sell as soon as possible.

[Farmgirl]

Thanks!

These stocks were originally part of an ESOP as my dad worked for Verizon.  He died 10 years ago.  So they went to Mom.  She died in June.
Don't know the original purchase price.

If I hang on to these shares, is there a way you can have the dividends reinvested like you can with a Vanguard fund?

Like I said, this is all new to me.

[jrbrokerr]

I think they should be able to be reinvested, you will have to do some research, its better to do it by yourself in order to keep disciplined and motivated...

Here I am posting a link on a yield on cost calculator, but if htye are 10+ years older, the dividiend yield on cost must be very attractive now... I will keep it but that´s me....

http://www.dividend-calculator.com/yoc.php

[Proud Foot]

At what price were they bought ?? Also, Verizon has been raising its dividend for quite a few years now, so it could be interesting to take a look at which yield on cost the shares are sitting at as of today... if they are 10+ years old, the yield on cost should be high and I would keep the stock....

good luck

jrbrokerr, could you explain why you would be interested in yield on cost for these shares and how that would influence the buy/sell decision? While I do track the yoc of my stock investments I do not use it as a part of my decision to sell as it is a historical metric that I use more for general informational purposes.

[Farmgirl]

Everyone, thank you!

I appreciate the info you've given here.  I'm learning much. 

Trying to escape the cube farm in December 2018. 

[jrbrokerr]

At what price were they bought ?? Also, Verizon has been raising its dividend for quite a few years now, so it could be interesting to take a look at which yield on cost the shares are sitting at as of today... if they are 10+ years old, the yield on cost should be high and I would keep the stock....

good luck

jrbrokerr, could you explain why you would be interested in yield on cost for these shares and how that would influence the buy/sell decision? While I do track the yoc of my stock investments I do not use it as a part of my decision to sell as it is a historical metric that I use more for general informational purposes.

Hi PF,

Sure. Because Verizon has been growing its dividend year after year, so if the purchase was made a long time ago and say the YOC is now sitting at 8%-10%, why would you sell if you are already receiving , on pure divividend ,what the market returns historically on average ?? Just keep it, as Buffet holding in Coca Cola, I think the YOC is approx. now at 100% per year,

[jrbrokerr]

Hi PF,

Sure. Because Verizon has been growing its dividend year after year, so if the purchase was made a long time ago and say the YOC is now sitting at 8%-10%, why would you sell if you are already receiving , on pure divividend ,what the market returns historically on average ?? Just keep it, as Buffet holding in Coca Cola, I think the YOC is approx. now at 100% 50%+ per year,

[dandarc]

Hi PF,

Sure. Because Verizon has been growing its dividend year after year, so if the purchase was made a long time ago and say the YOC is now sitting at 8%-10%, why would you sell if you are already receiving , on pure divividend ,what the market returns historically on average ?? Just keep it, as Buffet holding in Coca Cola, I think the YOC is approx. now at 100% 50%+ per year,

Because you're not receiving that, on pure dividend, today.  OP can have around $9K (what I think OP is likely to receive after fees and taxes selling these things) or the future dividends plus whatever the shares might be liquidated for in the future.  Which option is most likely to work out the best is anything but clear.  The cost paid decades ago is not relevant to the decision today, other than as a component that might help estimate future returns.

[Proud Foot]

Hi PF,

Sure. Because Verizon has been growing its dividend year after year, so if the purchase was made a long time ago and say the YOC is now sitting at 8%-10%, why would you sell if you are already receiving , on pure divividend ,what the market returns historically on average ?? Just keep it, as Buffet holding in Coca Cola, I think the YOC is approx. now at 100% 50%+ per year,

Because you're not receiving that, on pure dividend, today.  OP can have around $9K (what I think OP is likely to receive after fees and taxes selling these things) or the future dividends plus whatever the shares might be liquidated for in the future.  Which option is most likely to work out the best is anything but clear.  The cost paid decades ago is not relevant to the decision today, other than as a component that might help estimate future returns.

This right here.  A YOC of 8-10% doesn't really matter when the current market yield of Verizon is 4.78%. What if, for example, you had a YOC of 10% but the current yield is 1.5%? I wouldn't hold onto the investment because of the 10% YOC but would consider the yield of 1.5% in my analysis, particularly when I can get a better dividend yield with a different investment (Verizon at 4.78%). Obviously this is only one piece I would consider when evaluating the stock.

[jrbrokerr]

W.O.W. ! Of course a YOC matters!! is what you are getting paid as a dividend for your initial investment!!

http://www.suredividend.com/yield-on-cost/

[alexpkeaton]

but if htye are 10+ years older, the dividiend yield on cost must be very attractive now

The yield on cost basis is irrelevant. The decision to buy or sell based on yield only matters at today's market price, and perhaps any tax implications there might be from a sale.

[dandarc]

W.O.W. ! Of course a YOC matters!! is what you are getting paid as a dividend for your initial investment!!

http://www.suredividend.com/yield-on-cost/

From your article:

Taking a look at Warren Buffett’s yield on cost on his Coca-Cola investment is certainly a fun exercise. However, what matters to investors now is whether Coca-Cola can continue its dividend growth going forward.

Once you already own the shares, yield on cost is little more than a bit of trivia.  If owning a share of VZ today is a good investment, does it matter whether I bought that share yesterday, or have had it since 1984?  No - that share will pay me the same dividends and experience the same gains and losses as any other share that I acquired at any other time.

http://moneymamba.com/yield-on-cost-the-financial-ratio-to-forget-forever/

ETA: I disagree with jrbrokerr's article that what matters is if KO can continue its dividend growth going forward.  What matters today is whether KO will provide a good total return going forward.

[jrbrokerr]

It is not irrelevant. It is a yield you are getting without any market movements... if another 2008 financial crisis comes, you are getting that yield while the market is tanking (supposed div. doesn´t get cut)

take a look at dividendgrowthinvestor.com site, that guy invests only on dividend growth stocks

[Gronnie]

If you inherited these stocks, you should have a stepped up basis. Your tax basis should be what they were worth when you inherited them.

[Proud Foot]

W.O.W. ! Of course a YOC matters!! is what you are getting paid as a dividend for your initial investment!!

http://www.suredividend.com/yield-on-cost/

When looking at a portfolio as a whole and counting "cost" as your contributions then I could see that. Here is a made up example, why would it be better to hold investment A rather than selling and purchasing investment B.

A: Cost: $100, Current Mkt Value: $400 Current Total Dividends: $15  YOC=15% Mkt Div: 3.75%
B: Mkt Value if Invested: $400 Current Total Dividends: $25  Mkt Div: 6.25%

The YOC of 15% means nothing when the current market yield is less than the alternative. For the same market value you could be getting a better return on your money. YOC can be a misleading statistic when you are reinvesting your dividends as well as your YOC can be increasing while your actual per share dividend may be flat or negative.

And you mentioned dividendgrowthinvestor.  While I know I have not read anywhere close to everything he has written, I do not recall him mentioning YOC. He seems more focused on the actual dividend per share and whether a company is raising it or not.

[alexpkeaton]

It is not irrelevant. It is a yield you are getting without any market movements... if another 2008 financial crisis comes, you are getting that yield while the market is tanking (supposed div. doesn´t get cut)

I wouldn't assume a dividend won't get cut in a downturn. Some companies did/do avoid it, sure, but it's not a good assumption to make. Some companies load up on debt to maintain dividend growth, does an increasing dividend make a company inherently a better investment?

Since you're only assuming your invested principal is what matters, not the market price, do you discount capital gains entirely? Why? It seems the only thing this YOC metric does is make you feel like you're getting a large risk-free return. But you're not.

The only thing that matters is whether Verizon is a good investment today. That's true of any investment. No idea whether VZ is a good stock to buy or not. Few of us here probably do, which is why we typically invest in index funds.

[Farmgirl]

Thank you for all of your help and insights here.

The plot thickens....  Mom had a MetLife Insurance Policy from 1937 (for $100 in Life Insurance).  Found it listed on a state unclaimed property site.  Filed a claim with the state.  Turns out that MetLife demutualized back in 2000.  So I'm learning about that too.

[Proud Foot]

Thank you for all of your help and insights here.

The plot thickens....  Mom had a MetLife Insurance Policy from 1937 (for $100 in Life Insurance).  Found it listed on a state unclaimed property site.  Filed a claim with the state.  Turns out that MetLife demutualized back in 2000.  So I'm learning about that too.

My guess is that was from a cash payout at the time of demutualization.  From what I understand MetLife policyholders were given the option of cash or stock during the process of demutualization and IPO. As far as the actual insurance policy you should still be able to collect as long as the plan was in place and paid up at the time of her death.

[Farmgirl]

Thank you, Proud Foot!

I did end up calling MetLife and am submitting paperwork on the insurance policy today.  Made a claim with the Unclaimed Property dept at the state.  I think I have finally dealt with every piece of the estate that needs attention.

Next to submit Inheritance Tax to get the discount and work with my accountant to finalize the return.

Glad to have this forum for advice!

[Car Jack]

Getting back to your stock, back to basics.  Ask yourself "Would I buy Verizon stock today?  Frontier?".  If not, then sell and put the proceeds where you would put them.  If you say yes.....I'll assume you've been buying Verizon and Frontier already.

[smallstache]

OP's cost of inherited shares is $0. Therefore his/her yield on cost is incalculable (requires one to divide by $0).  As mentioned many times, OP's cost basis = the value of the stock at his mother's death.

Yield on cost is not irrelevant, as it can be a useful variable in deciding whether a high yielded such as Verizon is "too high."  It is not as good as PE ratios and payout ratios. For OP, it's not useful at all.

[Retire-Canada]

It is not irrelevant. It is a yield you are getting without any market movements... if another 2008 financial crisis comes, you are getting that yield while the market is tanking (supposed div. doesn´t get cut)

The bolded text is the key and is not something you can assume in a financial crisis. Once you take that specious assumption out of the mix focusing on yield vs. total return looks silly.

[Farmgirl]

Car Jack,  I don't buy individual stocks at all.  I'm in the Lazy Guys portfolio with Vanguard... VTSAX and VTBTLX, American Funds (because that's what my employer uses), and cash reserve. 

It looks like the 3 shares of Frontier are going to resolve themselves.  I just got a letter yesterday that they want me to either buy 97 more shares (not) or they are going to cash out the 3 shares.

The Verizon stock got my mom about $100 a quarter in dividends.  The stock is with a company called ComputerShare.

Here's a question...is there a way Vanguard can handle these shares?  It would be so nice to have everything in one place.

[smallstache]

It looks like the 3 shares of Frontier are going to resolve themselves.  I just got a letter yesterday that they want me to either buy 97 more shares (not) or they are going to cash out the 3 shares.

Not atypical to cash out small odd lots.

The Verizon stock got my mom about $100 a quarter in dividends.  The stock is with a company called ComputerShare.

Here's a question...is there a way Vanguard can handle these shares?  It would be so nice to have everything in one place.

Probably. Call Vanguard and ask.