Math Logic re Stock Sale

[marko]

Thanks to Excel I no longer have a math problem however my lifelong math logic challenge remains.

Here's my question: I have a stock that, over several years has paid me a total of about $11,000 in dividends.

The stock price itself has me underwater by $5000. So if I were to sell it would it be a loss or would I be ahead by $6,000? It is inside my IRA so there are no tax considerations.

I "think" I'm ahead but as always, I'm never quite sure but I am very happy to have this loser keep paying me.

 

[Jerry1]

Technically, you would have a loss, however, since it’s in an IRA, the loss is meaningless. Owning the stock has benefited your IRA balance by $6K.

 

[Exchme]

Yes, the dividends you received are part of total return, so yes, you are ahead by $6,000. As you say, since it is in an IRA, there are no tax consequences.

 

[SnowballCamper]

Yes, it's a capital loss (if you sell) of $5,000. The rub is if the dividends were reinvested or not. If they were not, then you're ahead $6k after the sale. If the dividends were reinvested then you'd have to look at the share prices when reinvestments happened...

 

[MichaelB]

Thanks to Excel I no longer have a math problem however my lifelong math logic challenge remains.

Here's my question: I have a stock that, over several years has paid me a total of about $11,000 in dividends.

The stock price itself has me underwater by $5000. So if I were to sell it would it be a loss or would I be ahead by $6,000? It is inside my IRA so there are no tax considerations.

I "think" I'm ahead but as always, I'm never quite sure but I am very happy to have this loser keep paying me.

Were the dividends reinvested or taken in cash? If taken in cash then you certainly are ahead.

 

[marko]

Were the dividends reinvested or taken in cash? If taken in cash then you certainly are ahead.

Yes, I took the dividends and DW spent every last one of them.

 

[MichaelB]

Yes, I took the dividends and DW spent every last one of them.

Well, in that case you technically are ahead, both with the stock and your DW.

 

[COcheesehead]

The stock price is adjusted downward with each dividend payment. So overall you are ahead.

 

[pb4uski]

Thanks to Excel I no longer have a math problem however my lifelong math logic challenge remains.

Here's my question: I have a stock that, over several years has paid me a total of about $11,000 in dividends.

The stock price itself has me underwater by $5000. So if I were to sell it would it be a loss or would I be ahead by $6,000? It is inside my IRA so there are no tax considerations.

I "think" I'm ahead but as always, I'm never quite sure but I am very happy to have this loser keep paying me.

Technically, you are ahead, but that isn't really the right question. The right question is what was your return?

If you paid $1,000,000 for the stock 5 years ago, it paid you $11,000 in dividends and the stock is now worth $995,000, you are "ahead" but should be miserable because the trade is a loser.

If you paid $100,000 for the stock 2 years ago, it paid you $11,000 in dividends and the stock is now worth $95,000, you are "ahead" but not estatic because your ~3% return is not great considering the risk that you were taking.

The reality is that if you have been invested "several" years, received $11,000 in dividends but had a $5,000 loss, I suspect that your total return or IRR was less than an online savings account... but it is positive and if that is all you need then ok.