Selling all of a holding after ex-dividend

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Selling all of a holding after ex-dividend

Postby STC » Wed Dec 26, 2012 1:48 pm

Say you hold the TSM through the Vanguard ETF VTI in one of your accounts. We have passed the ex-dividend date, but the payout has not occurred. If you had automatic dividend re-investment turned on, but sold all of the shares from that position today... what happens to the dividend? Do you end up re-creating the position? Or does the dividend get paid as cash since you no longer have VTI as a holding?

I had to incorporate some of my wife's 401k stuff into our plan. She had "forgotten" that she had these 401k's and now I am slightly off on my AA. I have a plan to remediate, but need to figure out the timing, as I do not want to double pay trading commissions to exit my VTI holding.
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Re: Selling all of a holding after ex-dividend

Postby livesoft » Wed Dec 26, 2012 1:50 pm

You will automatically re-invest the dividend. One should not have to pay to automatically re-invest dividends.
So if you do not want to automatically re-invest the dividend and wish to receive it as cash instead, I would suggest calling someone up to get that working for you.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Selling all of a holding after ex-dividend

Postby sscritic » Wed Dec 26, 2012 2:41 pm

STC wrote:Say you hold the TSM through the Vanguard ETF VTI in one of your accounts. We have passed the ex-dividend date, but the payout has not occurred. If you had automatic dividend re-investment turned on, but sold all of the shares from that position today... what happens to the dividend? Do you end up re-creating the position? Or does the dividend get paid as cash since you no longer have VTI as a holding?

Listen to livesoft. An order to reinvest dividends is an order to buy. You don't have to own a stock in order to buy it. You told them to buy stock with the money; they aren't going to send you a check when you have an outstanding order to buy. At least that's how I understand what reinvest dividends means; it means to invest the dividends (note the letters invest in reinvest - re just points the direction to the investment).
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Re: Selling all of a holding after ex-dividend

Postby origami » Wed Dec 26, 2012 3:50 pm

Does anybody have an experience with the situation or are all of you just guessing?
How will you sell if you end up having less than one share?
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Re: Selling all of a holding after ex-dividend

Postby livesoft » Wed Dec 26, 2012 3:53 pm

origami wrote:Does anybody have an experience with the situation or are all of you just guessing?
How will you sell if you end up having less than one share?

With a phone call if needed.

I do not have direct experience with the situation (except I do have some ETF dividends automatically re-invested), but I am also not guessing.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Selling all of a holding after ex-dividend

Postby sscritic » Wed Dec 26, 2012 3:57 pm

I have no experience, but I can google.
5. Does selling shares affect a distribution?
If you sell the entire stock position two days or more before the dividend-payable date, Your distribution will be paid in cash. If, however, You sell an entire position within the two day time frame of the security’s payable date, the dividend will be reinvested, resulting in additional shares. Selling these subsequent shares will require another sell order, which will incur additional commission charges. Dividends which would have been reinvested into less than one whole share will be automatically liquidated into cash.


I will let you google to find which broker has these policies. Some brokers don't have reinvestment programs, so I would surmise that the OP is not with such a broker.
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Re: Selling all of a holding after ex-dividend

Postby sscritic » Wed Dec 26, 2012 4:00 pm

The real answer to all such questions lies with your unidentified broker, not with random people on the internet. Did livesoft mention a phone call? Be sure to call your own broker, not another broker.
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Re: Selling all of a holding after ex-dividend

Postby Karamatsu » Wed Dec 26, 2012 7:56 pm

For what it's worth, this has happened to me several times over the years. At least at Schwab, the order to invest the dividend is placed and you end up with a small number of shares and/or fractional shares. The broker may or may not be willing to liquidate that tiny position with no commission, but far better not to have it happen in the first place.
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