How is the share price for the dividend determined? Is it the closing price of the dividend date (distribution date)?
If so, I wish this thing would go up AFTER that date not before!
I was told by Fidelity that if I elected to use the DRIP on my dividends at the time the dividend was announced, that Fidelity would purchase the shares in anticipation of the reinvestment which meant the share price would be at the price shortly before the dividend was paid. THEREFORE, I no longer have any positions using DRIP. I will reinvest at my time and not at the higher rate. I lost about $80 learning my lesson. I also had all my accounts and any new purchases automatically designated for all dividends and capital gain to be deposited into core accounts.
Plus, you should have had the option: that between the ex-date and the pay date to cancel your drip. Last quarter there were 5 weeks in-between. Also, with regular spos being offered by this company and the high dividend, the ex-div date is at a much higher p.p.s. than the pay date. I think you are getting a raw deal
I can't imagine a broker using their own money to pre buy shares at a higher price than the adjusted price on X day. I can imagine them Saying they did and pocketing the difference.
I know some closed end funds issue shares based on the average price over a week or two prior to distributions. Could this be what Fidelity was talking about?
Strange, that hasn't happened to me at Fidelity and I use dividend reinvestment all the time. It appears to me (from my monthly statements) that they use the closing price on the day that the money is received by Fidelity.
You mileage may vary.
I've talked at length in the past about this same "drip" conundrum. You would think that Fidelity, et al, would do what is in the client's best interest, since we are their customer. These are not "special" dividends which often work backwards in time re. Ex date, record date and payout date.
Since we get paid with physical monies on the pay date into our accounts you would think they would use that date to purchase your additional "Ex -div" shares. It is hard to believe they would "pre buy" your shares B4 the Ex-date. Did you ask them why they were doing this?
My daughter was $600 over one month on her text message plan. I thought I was safe with the 5000 text plan. My daughter told me to call Verizon a day B4 that contract month was over to see if she was over. The woman told me she had over 15,000 text and 5000 phone minutes that month. I was told I could pay $10 more for an unlimited plan and avoid the $600 fee.
She then asked me, "WHAT DO YOU WANT TO DO?". I told her I would have to get back to her after the contract month date passed ;-)
The share price for dividend reinvestment is determined by the Columbian drug cartel, using six loaded dice. They phone in the price from a pay phone at the corner drugstore to Price Waterhouse, who seals the number in a mayonaisse jar for security.