Author Topic: Dividends  (Read 7946 times)

mrpercentage

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Dividends
« on: July 17, 2015, 06:28:34 PM »
Man this subject has all kinds of things going around so lets gets some things strait. If Im wrong correct me.

1. The dividend does not move up and down with a stock price. If it pays $0.10 with the stock is $10.00 that is a 1% yield. If the stocks price drops to $5 it stills pays $0.10 so the yield is now 2% (unless they cut it which a shitty company may do). So the dividends increase when the company decides to return more profits to the share holder and a good DGI company will have a long history of this atleast 10 consecutive years of dividend growth. Growth of just the dividend-- stock price excluded.

2. The dividend is not equity sold of the stock. It could be cash holdings reduced, but they are not breaking off a piece of the demand for the company and giving it to you. Mutual funds and index may hold on to the dividends of stocks payed a various times temporarily inflating the price until there funds payout, but it is not a sell of equity. The value of the share would not be there without the dividends of the companies that were distributed to the mutual fund.

3. Dividend Growth Investing is about increasing your dividend payout not your equity. Its about finding reliable companies that have a solid record of increasing their dividend and returning profits to shareholders. While dividends will be used to purchase more shares thereby increasing your dividends payed, it has nothing to do with the capital gains equity of share price. The goal is to get your companies to buy themselves in increasing measure until you do not need anymore income. Then you stop reinvesting and have them just pay you instead. You live off of dividends without selling shares.

4. Dividends are only as good as the companies that pay them.

Good examples of DGI companies would be PG, JNJ, O

innerscorecard

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Re: Dividends
« Reply #1 on: July 17, 2015, 06:39:18 PM »
A dividend does not dilute your equity in the company, but it reduces the value of the company for which you retain the same amount of equity. The percentage of the pie you hold is the same after the dividend, but the size of the pie is reduced.

innerscorecard

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Re: Dividends
« Reply #2 on: July 17, 2015, 06:48:30 PM »
But as I said in the other thread, I am not unfavorably disposed towards dividend growth investing (even though I do not at all practice it myself) because dividends (dividend history to be price) are (even if very imperfect) an indicator of actual fundamental economic earnings power, and because it is psychologically a strategy that goes hand-in-hand with ignoring the market, focusing on fundamentals, and thinking about the long term.

Aphalite

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Re: Dividends
« Reply #3 on: July 17, 2015, 07:03:30 PM »
I don't understand why you made this thread. I don't think any of the posters in the other thread misunderstands what dividends are. There's no need to define dividends for anyone. Their argument is merely that there are other ways of returning value to shareholders than dividends and you shouldn't have a preference for which, such as reinvestment in the business or buybacks

1. You can't only look at dividend history. If dividend has been growing for 10 years but its due to management jacking up payout ratio, that's not a good sign.

2. Cash holdings IS equity in the company that's paying the dividend

3. Innerscorecard already covered this, but the majority of DGI are after income and pursuing a strategy where they can ignore market prices. It's up to the investor to decide whether to reinvest or to use the cash, as it is a return of value to the investor, if the company does not have good future growth prospects, the dividend is also unlikely to grow

4. Dividends are the same no matter which company pays them, it is merely one out of a multitude of ways companies can return shareholder value

mrpercentage

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Re: Dividends
« Reply #4 on: July 17, 2015, 07:42:50 PM »
I don't understand why you made this thread. I don't think any of the posters in the other thread misunderstands what dividends are. There's no need to define dividends for anyone. Their argument is merely that there are other ways of returning value to shareholders than dividends and you shouldn't have a preference for which, such as reinvestment in the business or buybacks

1. You can't only look at dividend history. If dividend has been growing for 10 years but its due to management jacking up payout ratio, that's not a good sign.

2. Cash holdings IS equity in the company that's paying the dividend

3. Innerscorecard already covered this, but the majority of DGI are after income and pursuing a strategy where they can ignore market prices. It's up to the investor to decide whether to reinvest or to use the cash, as it is a return of value to the investor, if the company does not have good future growth prospects, the dividend is also unlikely to grow

4. Dividends are the same no matter which company pays them, it is merely one out of a multitude of ways companies can return shareholder value
I think there are a lot of people who do not understand dividends including you. Cash holdings are not attached to share price except in funds. In a fund, etf, or trust cash is treated as an equity-- but it is not an equity in all stocks. Companies hold all kinds of asserts including cash that the share price does not benifit from.
In a fund it works like this:
Stock A+ B + C + (dividends held for payment for funds payout date)= share price
Stocks work like this:
Share price. Dividend payout. Not related.

innerscorecard

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Re: Dividends
« Reply #5 on: July 17, 2015, 07:51:55 PM »
I don't understand why you made this thread. I don't think any of the posters in the other thread misunderstands what dividends are. There's no need to define dividends for anyone. Their argument is merely that there are other ways of returning value to shareholders than dividends and you shouldn't have a preference for which, such as reinvestment in the business or buybacks

1. You can't only look at dividend history. If dividend has been growing for 10 years but its due to management jacking up payout ratio, that's not a good sign.

2. Cash holdings IS equity in the company that's paying the dividend

3. Innerscorecard already covered this, but the majority of DGI are after income and pursuing a strategy where they can ignore market prices. It's up to the investor to decide whether to reinvest or to use the cash, as it is a return of value to the investor, if the company does not have good future growth prospects, the dividend is also unlikely to grow

4. Dividends are the same no matter which company pays them, it is merely one out of a multitude of ways companies can return shareholder value
I think there are a lot of people who do not understand dividends including you. Cash holdings are not attached to share price except in funds. In a fund, etf, or trust cash is treated as an equity-- but it is not an equity in all stocks. Companies hold all kinds of asserts including cash that the share price does not benifit from.
In a fund it works like this:
Stock A+ B + C + (dividends held for payment for funds payout date)= share price
Stocks work like this:
Share price. Dividend payout. Not related.

Frankly, you are embarrassing yourself. No matter whether it's a lack of technical knowledge, or whether you are deliberately trolling (in which case you should be banned).

Aphalite

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Re: Dividends
« Reply #6 on: July 17, 2015, 07:52:15 PM »
Cash holdings are not attached to share price except in funds. In a fund, etf, or trust cash is treated as an equity-- but it is not an equity in all stocks. Companies hold all kinds of asserts including cash that the share price does not benifit from.

Uhh....

I can't tell if you're being serious or not, but either way, I don't know how to respond to this, carry on

mrpercentage

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Re: Dividends
« Reply #7 on: July 17, 2015, 08:02:59 PM »
why do you think Buffett likes to get enough shares in a company to return investments that company has to shareholders (himself)? Sorry Im currently reading Snowball his Bio.
Because a companies assets are not attached to share price but they can be liquidated and returned to share holders.

the dividend is tied close to earnimgs or sale of assets or funds rase by a new lease of shares--- thats where they come from. The best companies have them come only from earnings so you have to watch what percentage of the earnings the dividend costs.

if share price splits the dividend will split. if a company is doing crappy people will quit investing dropping the share price around when they cut a dividend-- but they are not related.
im typing one handed holding a baby

mrpercentage

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Re: Dividends
« Reply #8 on: July 17, 2015, 08:24:00 PM »
Okay I set the baby down.

More simply put a dividend is some of the earnings of a company divided amongst shareholders. They can get over zealous and payout to much, so when things go bad they don't have enough to pay you. Then they have to 1- sell more shares to raises capital 2- sell assets or make cuts 3-raise capital through debt 4-reduce the dividend

I has nothing to do with the price of Procter & Gamble, or the price of Johnson & Johnson. They are just agreeing to pay their shareholders X amount on X dates. If they do it right they will always earn enough to pay the dividend and have enough earnings to invest in their own development as a company.

Now where dividends look like a sell of equity is ETF's, Indexs, Funds, Trusts.
These "stocks" that really aren't stocks but funds of various sorts-- a grouping of companies-- have their value calculated as stated before.

stock A+ stock B + stock (whatever)+ all the dividends stock A,B, and Whatever paid that haven't been distributed yet= share price

In REITs its the same only instead of stocks its properties and instead of dividends it is rent collected that hasn't been distributed to you yet.

mrpercentage

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Re: Dividends
« Reply #9 on: July 17, 2015, 09:40:46 PM »

Frankly, you are embarrassing yourself. No matter whether it's a lack of technical knowledge, or whether you are deliberately trolling (in which case you should be banned).

I explained why it is not the case--even typing one handed while holding a baby. Perhaps I miss understood Peter Lynch, and Warren Buffett.

Please explain how a stock is valued to me. I prefer the language you would use to a third grader. I don't want to get lost or misunderstand.

aschmidt2930

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Re: Dividends
« Reply #10 on: July 17, 2015, 10:04:13 PM »
why do you think Buffett likes to get enough shares in a company to return investments that company has to shareholders (himself)? Sorry Im currently reading Snowball his Bio.
Because a companies assets are not attached to share price but they can be liquidated and returned to share holders.

the dividend is tied close to earnimgs or sale of assets or funds rase by a new lease of shares--- thats where they come from. The best companies have them come only from earnings so you have to watch what percentage of the earnings the dividend costs.

if share price splits the dividend will split. if a company is doing crappy people will quit investing dropping the share price around when they cut a dividend-- but they are not related.
im typing one handed holding a baby

First of all, nothing is "attached" to share price.  The market is illogical, despite what some will lead you to believe, there's no formula of a magic combination of of assets, investments and earnings that determine a share price.  There are fundamentals and trends that tend to guide it, but they are "attached" in no way, shape or form.


lemanfan

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Re: Dividends
« Reply #11 on: July 18, 2015, 04:47:11 AM »
Please explain how a stock is valued to me. I prefer the language you would use to a third grader. I don't want to get lost or misunderstand.

This is actually not a bad summary: http://www.investopedia.com/ask/answers/12/how-are-share-prices-set.asp


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Re: Dividends
« Reply #12 on: July 18, 2015, 05:30:39 AM »
Okay I set the baby down.

More simply put a dividend is some of the earnings of a company divided amongst shareholders. They can get over zealous and payout too much, so when things go bad they don't have enough to pay you. Then the company has to choose between
1) selling more shares to raise capital 
2) selling assets or making cuts
3) raising capital through debt
4) reducing the dividend

It (the payout of a dividend) has nothing to do with the price of [a company such as] Procter & Gamble...
note: I edited the above in attempt to bring clarity to the discussion.

In the most broad sense a company's dividend is 'priced into' the share price of a company.  It's an operating expense that has to come from profits or from the sources you listed above.  If the company had never paid out a dividend, its share price in theory would be increasing by the exact same amount as the yield on its dividend.

Cutting or raising a dividend can have a short-lived and irrational effect on the share price, because people will see the change as an indicator of the company's financial health, and react accordingly pushing the share price up or down.  However, these knee-jerk reactions will eventually even out as more financials become available and investors learn just how profitable the company actually is (at least that's the efficient market side of things).

A few other things worth mentioning:  As I said earlier, a company's dividend is a quarterly expense (most are paid out quarterly), which means that the company has less money to do R&D, run advertising campaigns, purchase new equipment or otherwise expand their business.  This is why good investors look closely at what percentage of the business's profit/free cash flow the dividend is.  This is also why many, including myself, view dividends as being bad for the company and bad for the individual investor. 

Aphalite

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Re: Dividends
« Reply #13 on: July 18, 2015, 06:21:32 AM »
In the most broad sense a company's dividend is 'priced into' the share price of a company.  It's an operating expense that has to come from profits or from the sources you listed above.  If the company had never paid out a dividend, its share price in theory would be increasing by the exact same amount as the yield on its dividend.

Cutting or raising a dividend can have a short-lived and irrational effect on the share price, because people will see the change as an indicator of the company's financial health, and react accordingly pushing the share price up or down.  However, these knee-jerk reactions will eventually even out as more financials become available and investors learn just how profitable the company actually is (at least that's the efficient market side of things).

A few other things worth mentioning:  As I said earlier, a company's dividend is a quarterly expense (most are paid out quarterly), which means that the company has less money to do R&D, run advertising campaigns, purchase new equipment or otherwise expand their business.  This is why good investors look closely at what percentage of the business's profit/free cash flow the dividend is.  This is also why many, including myself, view dividends as being bad for the company and bad for the individual investor.

This is not quite accurate.

Dividends are not an operating expense, it is a return of capital to owners funded from cash holdings. Investors don't take out dividends from net income or free cash flow when doing their analysis of the company, although they do, as you say, look at the payout ratio to determine if dividends are sustainable. If a company did not pay dividends, it would use that cash in other ways, such as share buybacks, or reinvestment into the company. The net effect of those actions on the earning power of the company will then cause the value of the company to go up or down, not solely the fact that they held onto the cash.

Distribution of dividends would only be "bad" for the company if it had great prospects for growth. Whenever we're talking about the use of cash in a company, we're always talking about the opportunity costs of the choices it has. If a company spent the cash on R&D that didn't end up going anywhere for example, its valuation would go down, not up. On the other hand, if the company has room to expand into say an international space, the money spent on dividends might cause it to grow earning power slower than it would have if it retained all earnings.

As we have discussed in the other thread, the need to focus on cash generating activites (as opposed to a focus on prettying up GAAP numbers) forces management to act in ways that promote liquidity. This means that management of dividend paying companies are more likely to be more responsible (though not always) with its capital allocation. Some investors interpret this to be a good thing. Others, though, reject this and believe that any return of capital/distribution of cash is harmful to the long term growth of the company. I do agree on the latter for smaller companies that are growing, but I think that for large caps, unless they're doing massive buybacks (ala IBM), there's nothing wrong with returning value to shareholders via dividends if the companies have run out of good ideas for growth.

Rightflyer

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Re: Dividends
« Reply #14 on: July 18, 2015, 06:33:35 AM »

A few other things worth mentioning:  As I said earlier, a company's dividend is a quarterly expense (most are paid out quarterly), which means that the company has less money to do R&D, run advertising campaigns, purchase new equipment or otherwise expand their business.  This is why good investors look closely at what percentage of the business's profit/free cash flow the dividend is.  This is also why many, including myself, view dividends as being bad for the company and bad for the individual investor.

I've been lurking here for a while. I see this argument above trotted out fairly regularly as though it was absolute.
I'm sorry but I have to speak up and disagree.

In a perfect world, which is most decidedly NOT the stock markets, this may have some merit. In reality, many larger corporations with mature business models cannot re-invest in their business with 100% efficiency.

I look at it from business managers point of view. I wish there was always 100% no lose capex. Or guaranteed success of all parts of a Programme portfolio.

It just doesn't work like that in real life.

Hence, publicly traded corporation enhance shareholder value with share buy-backs/dividend increases/special dividends.


 
« Last Edit: July 18, 2015, 06:38:38 AM by Rightflyer »

Rightflyer

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Re: Dividends
« Reply #15 on: July 18, 2015, 06:43:07 AM »
Aphalite...you beat me to it.

Good job explaining it. Thanks

Financial.Velociraptor

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Re: Dividends
« Reply #16 on: July 18, 2015, 06:58:07 AM »
Mr% is the most entertaining poster on these boards.  Take that to mean what you will.

nereo

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Re: Dividends
« Reply #17 on: July 18, 2015, 07:54:01 AM »
In the most broad sense a company's dividend is 'priced into' the share price of a company.  It's an operating expense that has to come from profits or from the sources you listed above.  If the company had never paid out a dividend, its share price in theory would be increasing by the exact same amount as the yield on its dividend.

Cutting or raising a dividend can have a short-lived and irrational effect on the share price, because people will see the change as an indicator of the company's financial health, and react accordingly pushing the share price up or down.  However, these knee-jerk reactions will eventually even out as more financials become available and investors learn just how profitable the company actually is (at least that's the efficient market side of things).

A few other things worth mentioning:  As I said earlier, a company's dividend is a quarterly expense (most are paid out quarterly), which means that the company has less money to do R&D, run advertising campaigns, purchase new equipment or otherwise expand their business.  This is why good investors look closely at what percentage of the business's profit/free cash flow the dividend is.  This is also why many, including myself, view dividends as being bad for the company and bad for the individual investor.

This is not quite accurate.

Dividends are not an operating expense, it is a return of capital to owners funded from cash holdings. Investors don't take out dividends from net income or free cash flow when doing their analysis of the company, although they do, as you say, look at the payout ratio to determine if dividends are sustainable. If a company did not pay dividends, it would use that cash in other ways, such as share buybacks, or reinvestment into the company. The net effect of those actions on the earning power of the company will then cause the value of the company to go up or down, not solely the fact that they held onto the cash.

Distribution of dividends would only be "bad" for the company if it had great prospects for growth. Whenever we're talking about the use of cash in a company, we're always talking about the opportunity costs of the choices it has. If a company spent the cash on R&D that didn't end up going anywhere for example, its valuation would go down, not up. On the other hand, if the company has room to expand into say an international space, the money spent on dividends might cause it to grow earning power slower than it would have if it retained all earnings.

As we have discussed in the other thread, the need to focus on cash generating activites (as opposed to a focus on prettying up GAAP numbers) forces management to act in ways that promote liquidity....
agreed - my post was directed at Mr% and his request to have things explained in the same manner as I would to a third-grader.  It is true that dividends are not technically an operating expense and are funded by cash (and sometimes debt if that is more favorable, see: Apple), but cash holdings ultimately come from net profitability, etc. etc.  Also agree that a dividend can align management's interests with its shareholders, although it can also be some leaded shoes when times are leaner since herd mentality tends to punish stocks that cut their dividends.

My basic reason for posting was to counteract the notion that dividends are somehow 'magical' - they are one tool of many, and IMO held much more dearly than they merit.

Aphalite

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Re: Dividends
« Reply #18 on: July 18, 2015, 09:09:05 AM »
Also agree that a dividend can align management's interests with its shareholders, although it can also be some leaded shoes when times are leaner since herd mentality tends to punish stocks that cut their dividends.

My basic reason for posting was to counteract the notion that dividends are somehow 'magical' - they are one tool of many, and IMO held much more dearly than they merit.

I gotcha. Yeah I agree. I think it's a real push pull on this forum when it comes to dividends. They're definitely not magical or a silver bullet/free lunch, at the same time, I think posters can go overboard discounting the predictive value dividends can have on how a company will fare in the future. But it's probably a more advanced topic and might not be the best for wide discussion

lemanfan

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Re: Dividends
« Reply #19 on: July 19, 2015, 03:15:00 AM »
One thing that is mentioned above but worth mentioning again:

There is a qualitative difference between reported earnings and actual cash flow.  Depending on the type of business, this can be more or less complex to realize.   In the long run they must have a correlation, but in the short run the reported earnings can be quite disconnected from the actual cash generated.

One good thing about dividends is that they are so tightly tied to the visible cash flow.  If a company borrows money to pay dividends, it shows quite clearly in the financial statements.

Two books I recommend that touch the subjects:

- The Cable Cowboy by Mark Robichaux.  It's a book about the legendary John Malone and explains why he fought hard to never ever show profit in his companies.  This does not mean he didn't make money. :)

- The Outsiders by William N. Thorndike Jr. A book showing how a few CEOs stand out by making sometimes unconventional gameplays and not always following the "grow or die" paradigm that most companies follow.  Returing assets to shareholders is one of the plays.

bsmith

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Re: Dividends
« Reply #20 on: July 19, 2015, 06:25:30 AM »
Hey y'all.

I'm trying to follow this discussion, with limited success. A concrete example might help me out. Can I get your opinions on some stock I bought a while back? I bought it as ORB (Orbital) and I bought $10k worth, at around 40 something a share. It subsequently was renamed to OA and was repriced so that I now have fewer shares. However, it keeps going up, so now my stock's worth $14,365. On top of that, I recently got a dividend of about $50.

It's been very successful, I think, and I'm pleased with it. Or I was, until I started reading this thread.


nereo

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Re: Dividends
« Reply #21 on: July 19, 2015, 07:55:00 AM »
Hey y'all.

I'm trying to follow this discussion, with limited success. A concrete example might help me out. Can I get your opinions on some stock I bought a while back? I bought it as ORB (Orbital) and I bought $10k worth, at around 40 something a share. It subsequently was renamed to OA and was repriced so that I now have fewer shares. However, it keeps going up, so now my stock's worth $14,365. On top of that, I recently got a dividend of about $50.

It's been very successful, I think, and I'm pleased with it. Or I was, until I started reading this thread.

Ok, there are a few things going on here.  First, you mentioned that the stock was "repriced so that I now have fewer shares".  That's called a reverse stock split.  Companies can split their stock or "reverse-split' their stock to try to keep the per-share price within a certain range.  What's important to know is that these do not change the value of the company (or your investment in the company) at all.  For example,  company XXX* could have 1 million outstanding shares priced at $20 per share, meaning the value of the company would be $20MM ($20 x 1MM).  The company could choose to split that stock 2:1 so that there are now 2 million shares, but those shares would be worth half as much, or $10.  The company would still be worth the exact same $20MM (2MM shares x $10).  OR, the company could reverse-split it's shares, meaning there would be just 500,000 shares valued at $40/share.  Again, the company would be worth $20MM.
Glancing at OA, it looks like there was a 3:2 split in 2002, 2001 & 2000.  What's odd is this seems like you should have more shares, not less. 

Second, there is the dividend to consider.  Dividends are determined ahead of time, (usually) paid quarterly, and are paid on a per-share basis.  If a company pays $1 per share and you own 10 shares... guess what, you get $10.  The dividend yield is simply the dividend dollar amount divided by the share price.  The yield will change slightly as the share price goes up or down.  Companies often try to keep their dividend yield around the same level, so if the company's stock goes up they might increase the dividend for the next quarter so that the dividend yield stays approximately the same.  In the case of OA, it has a dividend of $0.26 per share per quarter, and a yield of 1.67%.  It's worth noting that OA cut it's dividend last quarter from 0.32/share to 0.26/share (per quarter).

If your dividends are 'reinvested,' you will get more shares each quarter... in your case ~ 0.7 new shares ($50 dividend / $72 share price).  Reinvested over very long time periods (decades+) dividends can easily make up the majority of your gains due to compoundings. 
If you don't reinvest your dividends, you simpyl get a check every quarter (yay, money!)

Finally, you mentioned that you've had ~40% gains on this stock.  It's always good to come out ahead, but to truly know how your investment did you need to compare it to a benchmark.  OA makes defense and aeronautic equipment, so it's helpful to compare it to how that sector did over the same time period.  I don't know much about this sector but a quick googling showed me that there's an aerospace & defense ETF that includes stocks like Boeing, Lockheed Martin, etc.  I also always find it useful to compare how a stock would ahve done against the broader market (SP500 if it's a large stock, or a mid-cap index or small-cap index if it's a smaller company). 
Then, if you've held the stock for many years, your should take into account inflation.  A 40% gain might sound great, but if you bought it in 1995 (as an example) you need to compare 1995 dollars with 2015 dollars.  There are many ways of doing this, but just using the CPI, $10,000 in 1995 would be the same as $15,500 today.  That's the power of inflation, and why a great "gain" on a stock held for 10+ years might not be as great as you initially thought.

I hope that helps some.

bsmith

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Re: Dividends
« Reply #22 on: July 19, 2015, 08:43:52 AM »
Here's what I did:
10/11/2013   BOUGHT 200 SHARES OF ORB AT $20.81   COMMISSION ($7.00)   ($4,169.00)
10/28/2013   BOUGHT 125 SHARES OF ORB AT $23.53   COMMISSION ($7.00)   ($2,948.25)
7/25/2014   BOUGHT 114 SHARES OF ORB AT $28.09   COMMISSION $0.00    ($3,202.26)    

Then this happened:

2/13/2015   .ORB   STOCK DELIVERED OUT: 439 SHARES OF .ORB   
2/13/2015   OA   STOCK RECEIVED: 197 SHARES OF OA   
2/13/2015   OA   STOCK RECEIVED: 0 SHARES OF OA   
2/24/2015   OA   ORBITAL ATK CASH IN LIEU FRACTL SH @ 63.780   $7.07
6/25/2015   OA   ORBITAL ATK DIVIDEND ON 197 SHARES OF OA @ .26000   $51.22

JetBlast

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Re: Dividends
« Reply #23 on: July 19, 2015, 09:59:45 AM »
It appears that what happened is that Orbital Sciences (ORB) merged with the space and defense divisions of another company named Alliant Techsystems. The new company has taken up the name Orbital ATK and the stock symbol OA.

In the merger agreement a ratio of shares in the combined company is established. ORB shareholders received a set ratio of shares in the new company and ATK shareholders received some ratio of shares as well. The ratio for ORB shareholders was .449 to one. So your ORB shares were converted to 197.111 shares of OA. Since the company does not allow fractional shares, the .111 was paid to you in a cash amount of $7.07.

nereo

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Re: Dividends
« Reply #24 on: July 19, 2015, 10:07:51 AM »
Here's what I did:
10/11/2013   BOUGHT 200 SHARES OF ORB AT $20.81   COMMISSION ($7.00)   ($4,169.00)
10/28/2013   BOUGHT 125 SHARES OF ORB AT $23.53   COMMISSION ($7.00)   ($2,948.25)$
7/25/2014   BOUGHT 114 SHARES OF ORB AT $28.09   COMMISSION $0.00    ($3,202.26)    

Then this happened:

2/13/2015   .ORB   STOCK DELIVERED OUT: 439 SHARES OF .ORB   
2/13/2015   OA   STOCK RECEIVED: 197 SHARES OF OA   
2/13/2015   OA   STOCK RECEIVED: 0 SHARES OF OA   
2/24/2015   OA   ORBITAL ATK CASH IN LIEU FRACTL SH @ 63.780   $7.07
6/25/2015   OA   ORBITAL ATK DIVIDEND ON 197 SHARES OF OA @ .26000   $51.22

Ok, so here's what happened.  The company that you originally bought, Orbital Sciences (ORB) merged with Alliant Techsystems to form an entirely new company called Orbital ATK (OA).  At this time, your number of shares were adjusted to match the value from the new share price of OA.

Regardless, calculating your gain/loss is the same.  You paid ~$7,100 in october 2013 (two different transactions) and added $3202 in July 2014. On paper it gets a bit convoluted because of dividends received between purchases and the three different purchase prices, but there are lots of good gain/loss trackers available online and many here and other other forums will create their own spreadsheets for tracking gain/loss. 

To adjust your original share price just multiply by 2.228 (the difference in price between ORB and OA when the merger was completed).  So your adjusted purchase price for 10/11/2013 was $46.36 ($20.81 X 2.228), adjusted purchase price for 10/23/2013 was $52.42 and for 7/25/2014 was $62.58  You can do the same to adjust for the number of shares purchased.

does that make sense?

bsmith

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Re: Dividends
« Reply #25 on: July 19, 2015, 11:58:56 AM »
Yeah, that part I get. I need to figure out this dividend issue though, for when I file my taxes. I'm wondering if Turbotax will know what to do with it. I bought this through Scottrade, and it just gave me the dollars for it instead of reinvesting it in more stock (wasn't enough to buy any, anyway.) Also, is this going to be a regular thing? Where can I look for that?

I'm going to start reading "A Random Walk Down Wallstreet" as recommended elsewhere on this forum. Any other books or websites you can recommend would be helpful as well. I've got my debt paid off and am getting ready to invest on a regular basis now. I'm thinking Vanguard, but that's probably for a different thread.

nereo

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Re: Dividends
« Reply #26 on: July 19, 2015, 12:18:29 PM »
Yeah, that part I get. I need to figure out this dividend issue though, for when I file my taxes. I'm wondering if Turbotax will know what to do with it. I bought this through Scottrade, and it just gave me the dollars for it instead of reinvesting it in more stock (wasn't enough to buy any, anyway.) Also, is this going to be a regular thing? Where can I look for that?

I'm going to start reading "A Random Walk Down Wallstreet" as recommended elsewhere on this forum. Any other books or websites you can recommend would be helpful as well. I've got my debt paid off and am getting ready to invest on a regular basis now. I'm thinking Vanguard, but that's probably for a different thread.
At the end of the year you will get a 1099-DIV from Scottrade (you may have to go online to download the PDF).  It's a simple as entering that into Turbotax to determine taxes on your dividends.  In Scottrade (or any other online brokerage) you can set your dividends to reinvest.  You are incorrect that your dividend of $50 "wasn't enough to buy anyway" - you can buy fractions of a share - even 0.001 shares - with your dividends set to reinvest.

I highly recommend that you open up a Vanguard account and put all of your money into one of their broad index funds.  Picking individual stocks is at the very advanced end of the investing spectrum, and I don't think you are there yet.  Heck, I think 98%+ of investors are best served just putting all of their money into low-cost index funds.  My other piece of advice - make certain you are maxing out your IRA option every single year, and your HSA if you have access to one.  Contribute to your 401(k)/403(b) if you have one.  In most cases, those should come before investing in taxable accounts.

Read the JL Collins stock series. It's easy to digest, funny, and extremely useful.  Personal investing does not need to be complicated, and the simplest strategies often do better than highly complex ones.  You can "win-the race" quite easily simply by auto-investing every pay period into your IRA, 401(k) and taxable accounts (all in low-cost index funds) and then leaving them to compound over a decade or two.
http://jlcollinsnh.com/stock-series/

mrpercentage

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Re: Dividends
« Reply #27 on: July 19, 2015, 06:08:29 PM »
Scottrade doesn't do fractional shares. Fractional shares are bought by a brokerage themselves for the convienence of their customers. Scottrade and Robinhood do not do fractional shares

nereo

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Re: Dividends
« Reply #28 on: July 19, 2015, 07:10:04 PM »
Scottrade doesn't do fractional shares. Fractional shares are bought by a brokerage themselves for the convienence of their customers. Scottrade and Robinhood do not do fractional shares
really?  ... well that blows.  Learned something new.

JetBlast

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Re: Dividends
« Reply #29 on: July 19, 2015, 09:38:01 PM »
Scottrade doesn't do fractional shares. Fractional shares are bought by a brokerage themselves for the convienence of their customers. Scottrade and Robinhood do not do fractional shares
really?  ... well that blows.  Learned something new.

Yep. No fractional shares at Scottrade, though their Flexible Reinvestment Program is decent. You can pool dividends from any or all of your dividend paying stocks and reinvest it in up to five stocks of your choice commission free. Not being locked into reinvesting into the same company that paid the dividend could be useful if you feel some of the stocks in your portfolio are overvalued.

mrpercentage

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Re: Dividends
« Reply #30 on: July 20, 2015, 09:53:20 PM »
Not being locked into reinvesting into the same company that paid the dividend could be useful if you feel some of the stocks in your portfolio are overvalued.

+1

Thank you all for your responses. Sorry I lagged in response. Work and sleep have kept me on a tight leash