Post Your Wins

[disneysteve]

I cancelled my disability insurance yesterday. Now that I'm retired, I no longer need it. TBH I didn't really need it before that but I was hesitant to cancel it.

My monthly premium was $258.72 so that's a nice bill off the books. $3,100/year less in spending going forward.

Small win today. I got a check from the insurance company for $14.80. Apparently for some overage due to me based on the cancellation date.

[Fishindude77]

Got a $4900 quarterly dividend from a stock that we own today.
I typically cash these checks and keep the cash for spending money.

[james.hendrickson]

Got a $4900 quarterly dividend from a stock that we own today.
I typically cash these checks and keep the cash for spending money.

Great work! Nothing like a nice fat quarterly check.

[disneysteve]

Got a $4900 quarterly dividend from a stock that we own today.
I typically cash these checks and keep the cash for spending money.

Just remember to set some aside for taxes as that dividend is taxable income even though you didn't actually gain anything in the process.

I sold some stock this morning so there will be a $2,000 capital gains tax bill in the spring.

[Fishindude77]

Just remember to set some aside for taxes as that dividend is taxable income even though you didn't actually gain anything in the process.

I sold some stock this morning so there will be a $2,000 capital gains tax bill in the spring.

Fully aware of the tax implications and plan for it. Being retired, our income is not near what it was while working, so taxes aren't horrible.
We take all of our income tax free and settle up at year end. Better to owe them, than letting them use our money all year.

How do you figure I didn't gain anything in the process? I guess a $4900 check is nothing X (4) annually?

Guessing your rational is that the stock value goes down the amount of dividend that is paid out which is correct, but this is a long term play.
Much of this stock was purchased for $15-20 per share range and now trades around $30, it peaked around $40 a couple years ago. There's also the fact that it has consistently returned around 6%, and several years more than double that with special dividends.
Far better returns than a lot of other options. I'm pretty content, continuing to take the dividends.

[disneysteve]

How do you figure I didn't gain anything in the process? I guess a $4900 check is nothing X (4) annually?

Guessing your rational is that the stock value goes down the amount of dividend that is paid out which is correct

That's exactly what I meant. If the stock was worth $160,000 and paid a 3% dividend of $4,900 (rounding off), you now have $155,100 worth of stock and a check for $4,900. You still only have $160,000 total. There hasn't been any gain, but you still need to pay tax on the dividend.

This is why many investors prefer growth stocks that don't pay dividends. It's more tax efficient because you get to decide when to sell shares rather than being forced to take money out every 3 months whether you need it or not. Also capital gains tax is generally lower than ordinary income tax for many people.

[Fishindude77]

With growth stocks you have to sell out to take a win, and may never be able to get back in again at the price you purchased it for.

Owning stock is owning a small piece of a company. When a company turns a profit there are only so many things they can do with it; reinvest in the company, reward employees or reward shareholders.
If they are doing all of the above and continuing to build the business, it's a good deal for all. A little short term reduction in stock value means little if you don't intend to sell anytime soon.

[disneysteve]

With growth stocks you have to sell out to take a win

True. Also true with a dividend-paying stock. The dividend isn't a "win" since there's no net gain. If you want to lock in a gain, you need to sell shares.

Let's say you and I both own $100,000 worth of stock. Yours pays a dividend. Mine doesn't.
You get a $5,000 dividend check. I sell $5,000 worth of shares.
Both of us are left with $95,000 worth of stock and $5,000 cash. There's no difference at all.

Where there is a difference is with taxes. You are taxed on the entire $5,000 dividend payment at your ordinary income rate. I am only taxed on the small portion of the $5,000 that represents a capital gain and then only at the lower (or zero) capital gains rate, leaving me more money in my pocket.

For the record, I own plenty of shares of dividend-paying stocks, both individually and within mutual funds and ETFs. I just think it's important to understand that dividends aren't magical free money. You don't have any more money after the dividend is paid than you had before it was paid. All you have is a tax bill whether you wanted that money or not.

For that reason, I don't consider a dividend payment to be a "win" since it doesn't actually represent any gain or increase in how much money I have and it results in an unwanted tax bill so it's actually a loss.

[Fishindude77]

Ran across some really good local sweet corn yesterday. Purchased a bunch, blanched, cut off the cob, bagged and froze to have a supply of good sweet corn for the next year.
Sure beats the heck out of anything you can buy from the grocery store out of season, the canned and frozen bagged stuff doesn't even come close.

[Fishindude77]

Picked a whole bunch of beans out of the garden last few days. Blanched, cooled, then vac sealed for the freezer.
Can't beat these good summertime garden eats !

[srblanco7]

True. Also true with a dividend-paying stock. The dividend isn't a "win" since there's no net gain. If you want to lock in a gain, you need to sell shares.

Let's say you and I both own $100,000 worth of stock. Yours pays a dividend. Mine doesn't.
You get a $5,000 dividend check. I sell $5,000 worth of shares.
Both of us are left with $95,000 worth of stock and $5,000 cash. There's no difference at all.

Where there is a difference is with taxes. You are taxed on the entire $5,000 dividend payment at your ordinary income rate. I am only taxed on the small portion of the $5,000 that represents a capital gain and then only at the lower (or zero) capital gains rate, leaving me more money in my pocket.

For the record, I own plenty of shares of dividend-paying stocks, both individually and within mutual funds and ETFs. I just think it's important to understand that dividends aren't magical free money. You don't have any more money after the dividend is paid than you had before it was paid. All you have is a tax bill whether you wanted that money or not.

For that reason, I don't consider a dividend payment to be a "win" since it doesn't actually represent any gain or increase in how much money I have and it results in an unwanted tax bill so it's actually a loss.

Yes to all - with the caveat (i believe) that qualified dividends are taxed at cap gains rate and ordinary dividends at income tax rates. The majority (around 80%) of the dividends that I receive each year are qualified.

[disneysteve]

Yes to all - with the caveat (i believe) that qualified dividends are taxed at cap gains rate and ordinary dividends at income tax rates. The majority (around 80%) of the dividends that I receive each year are qualified.

Thank you for adding that. I believe that’s correct. Everything else still stands in that dividends don’t actually give you any money.

[Fishindude77]

I'll just keep cashing those checks and spending those dollars from those dividends that don't actually give me any money.

Analyze it anyway you want but an investment that has paid back 6%+ year in / year out with some years as high as 15% returns, plus now is worth close to double what I paid for it seems like a decent deal to me.
Can't do that with CD's and everyone seems to be thrilled about getting 5% returns on them.

[srblanco7]

I'll just keep cashing those checks and spending those dollars from those dividends that don't actually give me any money.

Analyze it anyway you want but an investment that has paid back 6%+ year in / year out with some years as high as 15% returns, plus now is worth close to double what I paid for it seems like a decent deal to me.
Can't do that with CD's and everyone seems to be thrilled about getting 5% returns on them.

Certainly sounds like a successful outcome. As we all know, there’s no single path to growing wealth and successfully living off your investment portfolio. Sounds like you’ve got a really nice outcome with this dividend investment. Congrats!

Though dividend investing is not a primary goal for me, I still receive dividend/cap gain payments from my brokerage account that will provide approximately $70k/year in retirement. Not too shabby and it’ll be the “first money” that we’ll spend each year since we’re going to have to pay tax on it regardless.

[disneysteve]

Though dividend investing is not a primary goal for me, I still receive dividend/cap gain payments from my brokerage account that will provide approximately $70k/year in retirement. Not too shabby and it’ll be the “first money” that we’ll spend each year since we’re going to have to pay tax on it regardless.

Exactly. If you invest in a diversified stock portfolio you get dividends whether you want them or not. In retirement spending those distributions first makes sense. We do it too. I turned off dividend reinvestment for all of our funds and let the money accumulate in the settlement account. I use that for my IRA RMD and in our taxable accounts use it to rebalance and buy CDs and Treasuries.

Ultimately total return is what really matters, not dividends, but you still are going to get dividends and need to deal with them.