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Dividend Reinvestment Question
Old 02-02-2018, 02:03 PM   #1
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Dividend Reinvestment Question

When you reinvestment dividends in a individual stock, what determines the price you pay on the day the money is invested ?

I’ve (dripped) stocks & funds @ fidelity for years, but never paid attention to the purchase price until yesterday. I have a stock that’s done awful over the past 14 months. Luckily for me, I quit (dripping) this one about 2 years ago. Since it’s @ multiyear lows, I thought I’d ‘outsmart the market’ by setting it back to (dripping) a couple weeks ago. Yesterday was the pay-out day & I was disappointed to find the shares were purchased very close to the day’s high & substantially higher than the closing price.

Obviously, I was wrong, but I assumed this was done the same way as the ‘employee stock purchase program’ I participated in through my employer. That is, the money was invested at the ‘closing price’ on the last trading day of the quarter.

Full Disclosure: It’s down another 5+% today. I guess that’s what I get for trying to time the market
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Old 02-02-2018, 02:34 PM   #2
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The price was passed into the code that did the distribution. In US based securities it's typically the price at that days close minus the distribution amount.

Another poster mentioned to me in other countries, think they were in Europe, they used an average price of the last week or something.
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Old 02-02-2018, 03:42 PM   #3
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The broker you have determines its own policy for the price you get. I'll give some examples:

1. Vanguard always uses dividends to buy shares at the market open on the payable date. You get that market open price.

2. Fidelity buys shares during the day on the ex-dividend date and then gives the average price it paid back then for the shares on the payable date (or is it the day after?).

3. TDAmeritrade buys on the day after the payable date whenever it feels like it and may charge you an available but slightly higher price.

4. I don't know what a place like Schwab does. Nor what others do.

Basically, you need to ask your financial institution what they do. They should have a document to send you which tells you exactly what they do.

Mutual funds are different.
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Old 02-03-2018, 01:21 PM   #4
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Thanks!
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