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On your portfolio summary how do you handle dividend reinvestment?

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On your portfolio summary how do you handle dividend reinvestment? It appears you just ignore the extra shares and thus any capital gain that occurs on these. Rather just capture dividends and credits. I am curious, as since reading your book I have been using your guidance to setup a rigid investment strategy as it was an area significantly lacking in my approach.

 

I do not use dividend reinvestment plans to reinvest dividends. This is because over time the paperwork and related calculations become horrendous. Also, I would not always want to invest more in some stocks if their price had risen substantially or the company was not doing well - not badly enough to sell it, but not well enough to invest more. For you it will all depend on your investment plan and its underlying philosophy.
 

I reinvest dividends and franking credits back into the portfolio, but not usually in the shares that created them because of my policy of not investing more than 6% of capital into any one stock. So, investment of dividends and franking credits are simply treated as new investments - more of an existing stock in the portfolio, or more likely into a new stock.

 

If you want to use dividend reinvestment plans, I think it would be simple to just record the dividend as income to calculate your return then the reinvestment as an additional purchase of shares in the stocks concerned.

 

Franking credits refunds, if any, would be up to you whether you bought more shares company by company. Personally, I would avoid the paperwork and invest in sizable parcels.

 

All of this is quite separate from your accounting for tax purposes.

 

Thereis additional discussion of this topic in the other questions under the Dividend Reinvestment keyword.

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