Ok, I got the $4.00 dividend, and I particiapate in the div reinvestment program at Etrade. The dividend was reinvested at the pre-dividend price of 15.89, versus the post-dividend price of around 12 or so.
Should the reinvestment be invested at the post-div price? I automatically lost 25% market value on my position and on my dividend dollar amount after the reinvestment. I email etrade to inquire but they are saying it is right.
For example 150 shares would get you $600, but after it is reinvested at $16 at close, you get 37.50 shares woth $600, but the the next day upon opening it is worth $450, so you automatically lose 25% on your investment. I would at a financial services company any dividends never shuld impact your market value, just offset...
Was something different with thisa dividend? If I just kept in cash and decided not to reinvest i would not have been hit with this drop.
Yes. It had a deferred ex-date. Didn't you notice?
"Should the reinvestment be invested at the post-div price? I automatically lost 25% market value on my position and on my dividend dollar amount after the reinvestment."
Maybe you lost 25%, but probably not. It depends upon whether the reinvested shares were newly issued by the company or bought on the open market. If they were newly issued, which they probably weren't, then yes, you got shafted. But if they were bought on the open market, you'll still get the dividend on those shares. Because this dividend used a deferred ex-date, any shares bought from December 13th through the December 27th payment date were purchased with due bills attached that requires the seller to forward the dividend to the buyer. They are not obligated to forward the dividend on the payment date, but on the due bill settlement date, which is today, the 31st. In practice it sometimes takes longer, but the point is that if your reinvested shares were bought on the open market at 15.89, they had to have been purchased before the ex-date of the 28th, and would then have been bought with due bills attached obligating the seller to forward the dividend to you. And if that is the case, then etrade was correct when they said it is right.
Ouch, sounds like you got screwed on that one. I would personally never participate in a dividend reinvestment program like that. Stocks with dividends always tend to drop that amount just after it's paid out. I'd rather just have the cash in my account to reinvest in whatever i wanted to.
I too had 150 shares of BAGL and got my $600 as cash in my TDameritrade account. I'm going to hold onto my shares and wait for the stock to recover in the future.
Not sure how the reinvestment process works with Etrade, but not reinvesting it at the post-dividend price is ludicrous.
I believe the typical policy for reinvestment is to purchase the stocks on the day the dividend is earned, not the following day when the price adjusts. I don't know that any brokerage has an option on when it is reinvested.