Q: I often see posts about members saying they are down on ALA-tsx or some other dividend paying company and wonder if they should sell (nearsightedness).
I offer my approach for consideration.
I own ALA and every months when I receive a dividend payment my ACB is lowered. It is like getting some of my original $$ back.
The present dividend yield is 6.7% annually, paid monthly at $0.175/month.
So every month my cost basis is lowering. This is great in a non-taxable account such as a TFSA or RSP (also good in a taxable account).
Eventually I will have 100% of my original, out-of-pocket $$$ returned to me.
At that point in time, lets say we got to a $0.00 ACB for example purposes, then no matter the price of the stock and any dividend I receive the return is incalculable. This is because a dividend of say, $1.00 is an infinite return on a ACB of $0.00.
What % return is Warren Buffet getting on his long held KO, Coke shares? I suspect he is near the infinite, incalculable figure = pure 100% profit. Or is it 100,000,000%... percent profit?
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Example (with made up #'s):
ALA bought at $30.00/share.
Get 6 dividends totalling $1.05 ($01.175*6 = $1.05).
New ACB: $30.00 - $1.05 = $28.95.
** So if ALA is at $29.00 now the investor is still up $ 0.05/share ($29.00 - $28.95).
But in a taxable account the investor on paper is down $1.00 ($30.00 - $29.00) so they could sell @ $29.00 and declare a capital loss even though they have a gain in reality.
This is 1 way the long term investor get richer and richer without getting out of bed.
Hope this is clear and helpful to some one.
It is like with real estate income property in that once you have your original down payment returned all future incomes are 100% profit (minus normal expenses like hydro, insurance..).
Have a great and prosperous day/year.
PS. The other 2 great things I have learned over the years:
1. To not listen to the media, financial tv shows....
2. Once a person knows how basic Options & Shorting works they can make $$$ in any market (up/down/sideways) easily.
I offer my approach for consideration.
I own ALA and every months when I receive a dividend payment my ACB is lowered. It is like getting some of my original $$ back.
The present dividend yield is 6.7% annually, paid monthly at $0.175/month.
So every month my cost basis is lowering. This is great in a non-taxable account such as a TFSA or RSP (also good in a taxable account).
Eventually I will have 100% of my original, out-of-pocket $$$ returned to me.
At that point in time, lets say we got to a $0.00 ACB for example purposes, then no matter the price of the stock and any dividend I receive the return is incalculable. This is because a dividend of say, $1.00 is an infinite return on a ACB of $0.00.
What % return is Warren Buffet getting on his long held KO, Coke shares? I suspect he is near the infinite, incalculable figure = pure 100% profit. Or is it 100,000,000%... percent profit?
--------------------------------------------
Example (with made up #'s):
ALA bought at $30.00/share.
Get 6 dividends totalling $1.05 ($01.175*6 = $1.05).
New ACB: $30.00 - $1.05 = $28.95.
** So if ALA is at $29.00 now the investor is still up $ 0.05/share ($29.00 - $28.95).
But in a taxable account the investor on paper is down $1.00 ($30.00 - $29.00) so they could sell @ $29.00 and declare a capital loss even though they have a gain in reality.
This is 1 way the long term investor get richer and richer without getting out of bed.
Hope this is clear and helpful to some one.
It is like with real estate income property in that once you have your original down payment returned all future incomes are 100% profit (minus normal expenses like hydro, insurance..).
Have a great and prosperous day/year.
PS. The other 2 great things I have learned over the years:
1. To not listen to the media, financial tv shows....
2. Once a person knows how basic Options & Shorting works they can make $$$ in any market (up/down/sideways) easily.
