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Strategies & Market Trends : Dividend investing for retirement -- Ignore unavailable to you. Want to Upgrade?

To: Maurice H. Norcott who wrote (30473)	1/22/2019 8:12:05 AM
From: spindr00	Read Replies (2) \| Respond to of 34328

>> the dividend isn't income << " I'll be sure to tell the IRS that. I'm so happy you came along to tell me I'm not making money. You truly have a dizzying intellect." Since you only offered a snarky comment about paying taxes and since you made no attempt to answer my question, I can only assume that you don't know the answer to the question that I asked you and that you have no clue what happens in your brokerage account on the ex-div date. To repeat the question: ------ If you used a Market-on-Close (MOC) order Friday afternoon to buy 100 shares of Clorox (CLX), you paid$154.37 . Tomorrow morning (1/22) is the ex-dividend date for 96 cents. - What is going to happen to the price of CLX before trading starts tomorrow morning? - What will your 100 shares of Clorox be worth before trading starts tomorrow morning? Answer that correctly and you'll understand why the dividend isn't income and why subsequent share price appreciation is required to make it income (income being defined as an increase in the value of your aggregate position). ------- It's now Monday morning and CLX has gone ex-dividend for 96 cents. The closing quote this morning is now shown as $153.41 and that means that your hypothetical 100 share purchase of CLX now has a paper loss of $96. That is because on the ex-dividend date, the stock exchanges reduce share price by the EXACT amount of the dividend.That means that your account is worth $96 less than it was at Friday's close. On the Feb 8th Payment Date you will be made whole when you will receive your $96 back. If this was done in a non sheltered account, you'll have to pay taxes for the privilege of receiving that $96 dividend. It's taxed as income but all you achieved was receiving a cash flow from the value of your equity position. I do not call that income that you can live off of. When share price recovers to your purchase price of $154.37, ignoring commissions, you will be able to sell your stock for a break even. At that point, your dividend will become actual "income" (as in profit) but it only became so because share price appreciated. Total Return = Capital Gain + Interest + Dividend There is no interest involved. The stock exchange share price reduction was -$96 (capital loss). The dividend is + $96. Therefore: Total Return = - $96 + $96 = ZERO Dividends do not increase the value of your position/account. One last item. FINRA Rule # 5530 (Adjustment of Orders) states that all open customer orders shall be adjusted by the amount equal to the dividend, payment, or distribution on the day that the security is quoted ex-dividend unless marked "Do Not Reduce" by the customer. Geez, the stock exchanges have actual rules for handling the ex-dividend share price reduction. Yes, I understand the ex-dividend process and what happens in my brokerage account on the ex-dividend date. Thank you for the compliment that I have a dizzying intellect. QED