Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Generally, a stock’s price rises in the days leading up to its ex-dividend date. Investors want to own it time to qualify to receive the dividend. So the last closing price before the ex dividend date should fully reflect the stock’s intrinsic value + the dividend. Once the ex-dividend date arrives, the stock should fall by roughly the amount of the dividend. It’s now become cheaper to buy / less valuable to own because new owners will not receive the current dividend.
Hmmm, I know that when a mutual fund pays a distribution the share price drops accordingly, but I never knew that a dividend payment automatically has the same affect on the price of a share of common stock.
To my knowledge (and based on the Motley Fool piece) it is not automatic. Just a consequence of a normally functioning marketplace. Other factors could intervene and impact the stock’s price before the market reopens on the ex-dividend date.
I recently sold an ADR the day before it went x-dividend and bought it back after the market opened the following morning. In this case, the motive was to avoid a 10% foreign tax on dividends. It’s an especially onerous tax to U.S. domiciled investors because it applies even to holdings inside IRAs or other tax-deferred accounts.
The stock did fall by a few dollars overnight - but a little less than I would have expected. I’d not recommend trying this with any substantial holding because there is no guarantee it will work as intended.
Yes, hank's got it: not automatic, just the result of the way people and institutions behave in the Market setting, given the ins-and-outs and loopholes and crapola rules and exceptions and nonsense and STUFF.
Okay, got it. I used the word "automatic" on purpose hoping for additional clarification from those of you who are much more experienced with buying/selling individual company stocks.
I believe that in the case of mutual funds and ETFs it is automatic. That is … the fund’s NAV is regularly updated to reflect accrued dividends, interest, cap gains. And when those are distributed to shareholders the share price falls by the predictable / necessary amount. Thus, Roy’s earlier observation was right.
Question for you smart guys, so given all this talk on divie's, the only reason to pick a stock that gives higher dividends than other stocks is if it is held in a taxable account since dividends are taxed less than regular income, right? There is zero added return benefit in a tax deferred account - only total return matters. I do understand a stock paying higher dividends may be a smoother ride, but not necessarily give better returns.
Is my thinking accurate, or am I off base with my bias?
Question for you smart guys, so given all this talk on divie's, the only reason to pick a stock that gives higher dividends than other stocks is if it is held in a taxable account since dividends are taxed less than regular income, right? There is zero added return benefit in a tax deferred account - only total return matters. I do understand a stock paying higher dividends may be a smoother ride, but not necessarily give better returns.
Is my thinking accurate, or am I off base with my bias?
Given my tax bracket since I'm still working, I prefer QDI taxed at 15% versus various bonds that are taxed as ordinary income at my 35% bracket. But I don't go looking for insanely-high dividends either ... my sweet spot is 4-7% (with good coverage/growth) depending on whether they're common or preferreds.
(I’ll defer to others as far as Mike’s question for “smart guys”.)
But I agree 100% with Mike’s reasoning. I do have some non-sheltered holdings in a tax exempt muni bond fund. Aside from that, the other 90%+ resides in IRAs and I don’t give a hoot fret much about dividends. Total return is what matters to my thinking. Not to criticize those who do pay heed to dividends inside tax sheltered accounts. Monitoring dividends might well help them make better purchase or allocation decisions, just like monitoring other investment attributes can.
I noted in another thread that there is one important exception. If you own a foreign holding (including ADRs) taxes do apply to you even if held inside a tax deferred account. Withholding of taxes owed is required by law (per jurisdiction). Some foreign tax rates are as high as 25%. There seems to be some ways to get some of that back thru your U.S. tax filings, but apparently not worth the hassle for most people. The U.S. has treaties with several countries that limit tax liability for U.S. citizens. In the case of Switzerland, where I have a small exposure, the withholding tax is limited to 10% of dividends. No tax on cap appreciation.
Sold 100k SUTXX MMKT (currently 5.17%) to extend income ladder- 50k treasuries, mature 2/26 @ 4.9698%, and 1/27 @ 4.806%
Note: The Washington Post is reporting that "the U.S. economy grew at 1.6 percent annual rate in first quarter 2024, a sharp slowdown".
Those of us currently building and maintaining income ladders should be alert that high current MMKT returns may drop significantly if the economy slows and the Fed continues finally begins it's rate reductions, and consider moving at least some MMKT cash to long-term securities.
BOT more shares of GOOGL while down slightly in pre-market trading to bring position to intended level. Avg share price just under $138 (a wee bit lower than the $140+ on our first BUY/SELL). Will either be another ST trade. if we get a bounce, or will ADD to position as LT HOLD. All yet TBD.
EDIT: Decided to dbl the position. BOT more shares during early market action as price kept falling. Snagged next batch at just under $136. Fun stuff!
EDIT_2: Closed out the position with some BUYs later in the day in the $135's, to end at an avg purchase price of $137, less than 1/2% below today's Close. Seems to be about where we were when we took the first ride on GOOGL. Lot of negativity towards it now but thinking we should be just about done with this round of punishment. We'll see!
SOLD full position in GOOGL on after hours POP at ~$177 for a ST Gain of ~29%. This trade took a LOT longer than expected to materialize but ended up being the best of my three ST plays on GOOGL, then NVDA, then GOOGL again.
Just a heads-up … GDX (gold miners index) is down near 4% on the day. Gold is off $50 to just above $2300 after peaking over $2400 2 weeks ago. Is it a good buy? I don’t know. If I had some spare cash lying around, I’d take a small position (but I don’t). Have pretty much side-stepped the metals this year because of the combined volatility + age issues. I do keep 10% of portfolio in PRPFX, and have for about 20 years. It maintains a 30-35% exposure to metals + miners.
FWIW - While most observers think the miners are underpriced relative to the metal, investing in the miners is a lot more risky. For a conservative small play, I’d stick with something tied to the price of the metal itself rather than going out on a limb with the miners. Lots of such funds. I’ve used precious metals (mix) GLTR before. But there are cheaper ones.
Bought a 5 year government agencies bond today yielding 6.25%. Callable of course. Ride the ride until it ends, but with inflation higher for longer, maybe that could last a year or so.
As you've said @hank, gold has had a heck of a ride ytd. I had added some to my long term holding (since 2020) earlier this year but I'll hold off buying more now. Gold was probably due for this correction. I did take a gamble on a miner stock, Barrick Gold Corp, GOLD, about a month ago after a positive Barrons article. It's quite volatile and I'm probably about even on the bet.
Started 500s HESM in my Schwab income-oriented account. Will double it in the coming days depending on the market moves ... but as this is newsy week w/the FOMC, I prefer to tranche into positions, especially when it's commission-free.
Attorney General Merrick Garland on Tuesday will recommend loosening restrictions on marijuana in what would be a historic shift in federal drug policy, according to multiple people familiar with the matter.
The measure, if enacted, would not legalize marijuana at the federal level but could broaden access to the drug for medicinal use and boost cannabis industries in states where it is legal. The move may also prove to be a political win for President Biden, who is campaigning for reelection and has sought to ameliorate racial and criminal justice inequities wrought by the nation’s long war on drugs.
The Justice Department was scheduled to submit the formal recommendation to the White House on Tuesday. It follows the Drug Enforcement Administration’s approval of the Department of Health and Human Services recommendation that marijuana be reclassified.
The White House Office of Management and Budget must review the measure, according to the people familiar with the matter who spoke on the condition of anonymity to discuss internal administrative matters. The measure, if accepted, would not go into effect for months until the public has a chance to comment.
The DEA’s approval was first reported Tuesday by the Associated Press. The DEA, the Justice Department and the White House declined to comment.
For more than five decades, marijuana has been classified as a Schedule I controlled substance with a high potential for abuse and no accepted medical use. Under the DEA’s proposed change, marijuana would go to the less risky Schedule III — in the same tier as prescription drugs such as ketamine, anabolic steroids and testosterone.
The historic policy shift comes as marijuana is easier than ever to obtain and has become an industry worth billions of dollars in the United States. Thirty-eight states and D.C. have legalized medical marijuana programs, and 24 have approved recreational marijuana.
Finally, finally: Took the rollover check from Bruce BRUFX which arrived on Saturday, and put it into wifey's IRA at Schwab. Buying shares with the entire amount in WBALX. Classified as a conservative balanced fund. Right now, there's a tiny bit more in bonds than stocks. June and December payouts, each year.
Yes, you've got it @Crash. I usually place it when a stock has good gains, and I don't want to lose them. If a stock has reached or is close to fair value it may be time to implement a trailing stop. The percentage you put in for the stop (sell) continues to move the sell price up as the stock increases. Again, there are situations where you can get burnt selling on low spikes, usually with volatile small or low volume stocks.
Comments
The Motley Fool explains it.
So @Old_Joe and @Mark have it correct.
OK. that's clearer, now. Thanks, all. This is why I hated Math in school.
Yeah, it takes at least three of us to keep up with Crash...
To my knowledge (and based on the Motley Fool piece) it is not automatic. Just a consequence of a normally functioning marketplace. Other factors could intervene and impact the stock’s price before the market reopens on the ex-dividend date.
I recently sold an ADR the day before it went x-dividend and bought it back after the market opened the following morning. In this case, the motive was to avoid a 10% foreign tax on dividends. It’s an especially onerous tax to U.S. domiciled investors because it applies even to holdings inside IRAs or other tax-deferred accounts.
The stock did fall by a few dollars overnight - but a little less than I would have expected. I’d not recommend trying this with any substantial holding because there is no guarantee it will work as intended.
Is my thinking accurate, or am I off base with my bias?
But I agree 100% with Mike’s reasoning. I do have some non-sheltered holdings in a tax exempt muni bond fund. Aside from that, the other 90%+ resides in IRAs and I don’t
give a hootfret much about dividends. Total return is what matters to my thinking. Not to criticize those who do pay heed to dividends inside tax sheltered accounts. Monitoring dividends might well help them make better purchase or allocation decisions, just like monitoring other investment attributes can.I noted in another thread that there is one important exception. If you own a foreign holding (including ADRs) taxes do apply to you even if held inside a tax deferred account. Withholding of taxes owed is required by law (per jurisdiction). Some foreign tax rates are as high as 25%. There seems to be some ways to get some of that back thru your U.S. tax filings, but apparently not worth the hassle for most people. The U.S. has treaties with several countries that limit tax liability for U.S. citizens. In the case of Switzerland, where I have a small exposure, the withholding tax is limited to 10% of dividends. No tax on cap appreciation.
Note: The Washington Post is reporting that "the U.S. economy grew at 1.6 percent annual rate in first quarter 2024, a sharp slowdown".
Those of us currently building and maintaining income ladders should be alert that high current MMKT returns may drop significantly if the economy slows and the Fed
continuesfinally begins it's rate reductions, and consider moving at least some MMKT cash to long-term securities.FWIW - While most observers think the miners are underpriced relative to the metal, investing in the miners is a lot more risky. For a conservative small play, I’d stick with something tied to the price of the metal itself rather than going out on a limb with the miners. Lots of such funds. I’ve used precious metals (mix) GLTR before. But there are cheaper ones.
As you've said @hank, gold has had a heck of a ride ytd. I had added some to my long term holding (since 2020) earlier this year but I'll hold off buying more now. Gold was probably due for this correction. I did take a gamble on a miner stock, Barrick Gold Corp, GOLD, about a month ago after a positive Barrons article. It's quite volatile and I'm probably about even on the bet.
The etf MJ (Mary Jane) closed today during normal trading hours at +27.42% !!!
This scares me more than the bad numbers in the 'RED down' thread I started.
Added to PHEFX, my latest crush.
Attorney general moves to reclassify marijuana as lower-risk drug, officials say
Following is an excerpt from a current Washington Post report:
P.S.: MJ is up cause of news headline "DEA Moving To Reclassify Marijuana As Less Dangerous Drug"
Took the rollover check from Bruce BRUFX which arrived on Saturday, and put it into wifey's IRA at Schwab. Buying shares with the entire amount in WBALX. Classified as a conservative balanced fund. Right now, there's a tiny bit more in bonds than stocks. June and December payouts, each year.
CUSIP: 3130B13H8
Security Type: Government Agencies
Issuer Name: Federal Home Loan Bks
Maturity Date: 05/03/2029
Coupon Rate: 6.250%