Thursday, January 7, 2016

Dividend Reinvestment Program (DRIP)

I am invested in Apple stock on another stock brokerage, one that charges commissions for trading stocks. I eventually want to sell these shares of Apple and bring that money over to my Robinhood account. It looks like for the time being, I'm going to be holding on to my Apple stock (Due to the stock price currently being less than what I bought it for).

I've enabled Dividend Reinvestment Program (DRIP) on my other brokerage account. To explain DRIP, I'll use a real example from my Apple stock.

On 11/13/14, Apple paid out $0.47 per share as a dividend. At that time I had 13 shares of Apple stock. 13 shares x $0.47/share = $6.11. For that quarterly dividend, Apple paid me $6.11. Since I have DRIP enabled, this $6.11 bought more Apple stock (It reinvested the dividends).

The price of Apple stock that the dividends were reinvested at was $113.8525/share. So $6.11 / $113.8525/share equals 0.054 shares. After this DRIP, I had 13.054 shares of Apple.

At the next time a dividend is paid, I still get $0.47/share. So 13.054 shares x $0.47 = $6.14. The previous quarter I was paid $6.11, and the next quarter I was paid $6.14. As long as the dividend amount isn't decreased, and I stay enrolled in DRIP, the amount of money paid out to me in a dividend will increase every quarter.

Because of DRIP, I currently have 13.276 shares of Apple. Apple will probably pay a dividend of $0.52/share in February. So 13.276 shares x $0.52/share = $6.90. There is one positive thing about the stock price going down, and it's that I will buy more partial shares of Apple in February.

The stock price ended today at $96.45. The February dividend of $6.90 / $96.45/share = 0.072 shares. If Apple was at $115/share, then I would get $6.90 / $115/share = 0.06 shares.

This was a lot of numbers, but I hope it makes sense. I have an exit strategy for Apple in mind, and I hope I can execute it sooner rather than later. I want to bring this money over to my Robinhood account. For now, I am ok with getting more partial shares of Apple through DRIP.



No comments:

Post a Comment

Thanks for your thoughts!