How do Dividends and Dividend Reinvestment Plans work next to stocks?
Say I buy a stock. Do I select whether I want dividends to be reinvested or not, or how does it work? If I select not to reinvest, then how do I get the dividends rewarded (check, show up as cash in my justification?)? If I select to reinvest, are new shares bought on a market demand immediately when I receive the dividend, or how does that go? Thanks for your facilitate!
Answers: First, not all companies pay dividends. Some retain their income and reinvest in their business. Of the companies that pay dividends, most pay cheque the dividend quarterly. Many of these companies have dividend reinvestment plans and to sign up for them you should talk to the company's investor relations department or their stock verbs agent. The stock transfer agents run most of these programs.
The way contained by which your investment in a company is recorded, determines how you receive your dividend. In the old-fashioned days, you bought a stock through a stock broker and several weeks later, the company mailed a stock qualification to you. You became the "registered owner" and dividend checks were mail directly to you. There are some people who still hold their stock certificates within "physical" form. However, in an effort to stifle paperwork and make the settlement of trades more efficient and smaller amount costly, the stock brokerage firms formed the Depository Trust Corporation or DTC. DTC has become the record holder for a majority of the shares traded today. When you buy a share of stock through a broker, the broker will no longer arrange to hold a paper stock certificate sent to you and instead your shares will be reflect electronically in the records of the brokerage firm and on your portrayal statement. All of the brokerage firm's account holders will be aggregated together on the books of DTC. In this instrument, we shares are traded between stock brokerage customers, DTC simply makes a bookkeeping entry on their system, showing the shares being traded from one stock brokerage firm to the other. The individual brokerage firms next make the notation on your account statement.
When dividends are compensated by a corporation, the corporation usually sends the payment in two separate cable transfers. One is sent to the corporation's stock transfer agent who then sends broadsheet checks to those owners who hold physical shares. The other wire transfer sent electronically by the corporation to ito the holder of journal of the shares held in "street name" (who is DTC) and DTC deposits the money in respectively of the brokerage firms' accounts at DTC. The broker then allocates that portion of the dividend to your individual account. This happen almost immediately on the dividend payment date. This eliminate the need for paper checks and results surrounded by the faster receipt of dividend payments. Once the money hits your account, you can access it.
For dividend reinvestment plans, the stock verbs agent receives that portion of the dividend payment for those who elect to reinvest it. Depending on the program, the stock verbs agent can then either enter the marketplace on a specified day and purchase shares in the souk (usually at the close of trading or before the open, so that majority trading isn't affected), or it can use the average trading price of the company's stock over some period, like 10 days, and purchase the shares directly from the corporation (sometimes at a slight discount to the average trading price). In this shield, the corporation would be issuing new shares. Sometimes investors can sell their shares held within the dividend reinvestment plan through the stock transfer agent, and the agent will purchase those shares for those who are reinvesting their dividends.
For investors who own their shares in a brokerage rationalization in street name, you hold to sign up through your brokerage firm. Sometimes there are fees to participate contained by these plans.
"Do I select whether I want dividends to be reinvested or not.." Depends on who you use as a broker. Most let you decide. Scottrade does not reinvested dividends (unless you reward their $7 buy fee). Sending checks are expensive for brokerage houses so they would rather have the dosh show up in you money market picture. They usually supply a checkbook with the account for you to write checks as needed. If you select to reinvest, on the morning the dividend is paid, they buy more shares for you at the market price.
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Answers: First, not all companies pay dividends. Some retain their income and reinvest in their business. Of the companies that pay dividends, most pay cheque the dividend quarterly. Many of these companies have dividend reinvestment plans and to sign up for them you should talk to the company's investor relations department or their stock verbs agent. The stock transfer agents run most of these programs.
The way contained by which your investment in a company is recorded, determines how you receive your dividend. In the old-fashioned days, you bought a stock through a stock broker and several weeks later, the company mailed a stock qualification to you. You became the "registered owner" and dividend checks were mail directly to you. There are some people who still hold their stock certificates within "physical" form. However, in an effort to stifle paperwork and make the settlement of trades more efficient and smaller amount costly, the stock brokerage firms formed the Depository Trust Corporation or DTC. DTC has become the record holder for a majority of the shares traded today. When you buy a share of stock through a broker, the broker will no longer arrange to hold a paper stock certificate sent to you and instead your shares will be reflect electronically in the records of the brokerage firm and on your portrayal statement. All of the brokerage firm's account holders will be aggregated together on the books of DTC. In this instrument, we shares are traded between stock brokerage customers, DTC simply makes a bookkeeping entry on their system, showing the shares being traded from one stock brokerage firm to the other. The individual brokerage firms next make the notation on your account statement.
When dividends are compensated by a corporation, the corporation usually sends the payment in two separate cable transfers. One is sent to the corporation's stock transfer agent who then sends broadsheet checks to those owners who hold physical shares. The other wire transfer sent electronically by the corporation to ito the holder of journal of the shares held in "street name" (who is DTC) and DTC deposits the money in respectively of the brokerage firms' accounts at DTC. The broker then allocates that portion of the dividend to your individual account. This happen almost immediately on the dividend payment date. This eliminate the need for paper checks and results surrounded by the faster receipt of dividend payments. Once the money hits your account, you can access it.
For dividend reinvestment plans, the stock verbs agent receives that portion of the dividend payment for those who elect to reinvest it. Depending on the program, the stock verbs agent can then either enter the marketplace on a specified day and purchase shares in the souk (usually at the close of trading or before the open, so that majority trading isn't affected), or it can use the average trading price of the company's stock over some period, like 10 days, and purchase the shares directly from the corporation (sometimes at a slight discount to the average trading price). In this shield, the corporation would be issuing new shares. Sometimes investors can sell their shares held within the dividend reinvestment plan through the stock transfer agent, and the agent will purchase those shares for those who are reinvesting their dividends.
For investors who own their shares in a brokerage rationalization in street name, you hold to sign up through your brokerage firm. Sometimes there are fees to participate contained by these plans.
"Do I select whether I want dividends to be reinvested or not.." Depends on who you use as a broker. Most let you decide. Scottrade does not reinvested dividends (unless you reward their $7 buy fee). Sending checks are expensive for brokerage houses so they would rather have the dosh show up in you money market picture. They usually supply a checkbook with the account for you to write checks as needed. If you select to reinvest, on the morning the dividend is paid, they buy more shares for you at the market price.