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FT4Web by Investors FastTrack

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moneytree.gif (4012 bytes)Distributions, Dividends
When They Send You the Profits!

Updated  06/26/17

Where are Distributions found within FastTrack?

All types of distributions (general term for dividends, splits, capital gains, etc.) change the total return of an issue. Distributions are put on the T and P Chart as white dots on the red line. The white dot for splits is bigger. When you move the Dashed Pole to a white dot, the  distributions descriptions popup . You can right-click on that label to temporarily disable the distribution popup if you don't care about dividend details.

FastTrack's Spreadsheet will also list distribution totals. Tax Spreadsheet. will compute the gains/losses you should report on your tax returns.

What Is a Distribution?

Distribution is a general term applied to several different types of transactions.

  • C - LT CapGains
    Long-term Capital Gains: The most common form of capital gains is distribution of  cash from a mutual fund who sold appreciated assets held more than a year by the mutual fund. You may also have capital gains paid to common stock share holders.

  • L - Super LT CapGains
    These distributions were created by the tax reduction of 2001 for assets purchased after 1/1/2001 and held more than 5 years. There is a quirk in the act which allow conversion of assets bought before 1/1/2001 to use the new reduced tax rate by paying the old rate on pre 1/1/2001 gains and then the new rate on subsequent gains. Therefore, mutual funds that converted may have Super LT CapGains well before 1/1/2006.

  • D - Income
    Dividends are the most common form of distribution. Dividends are the payment of money to share or bond holders. Usually dividends are taxable as ordinary income except dividends from a municipal bond fund, but consult your tax adviser for details As of 1/1/2003, this includes "Qualified Dividend" which are taxed at lower rates under the 2003 tax reform bill. We continue evaluating the inclusion of these dividends as a specific category.

  • G - ST CapGain
    Short-term capital gains: These are capital gains from assets held less than a year. In 1998, Congress, in its collective wisdom,  instituted other holding periods which greatly confuses the capital gains treatment. FastTrack contains only short and long dividend characterizations.

  • I - Split Dollar Amount
    Most of these distributions are for mutual fund splits. They are carried as a dollar value rather than a split ratio. This category is probably unnecessary, but is used within FastTrack for DOS which does not offer the split ratio handling.

  • Z - Split Ratio
    These distributions are shown as a ratio based on the closing price of the underlying stocks. Splits are common with stocks, but also found in a few mutual fund histories.

  • S - Stock Div
    Used for certain types of complicated transactions. FastTrack carries the value of share splits as a dollar amount value. For example the AT&T spin-off of Lucent, we calculated the closing price of Lucent shares on the first day they could have been sold by an AT&T shareholder and reinvested those proceeds in AT&T shares at the closing price on the same day.

    Most of these transactions are special cases which have to be hand-worked, Our figures for total return MAY not agree with other published figures. We are interested in any feedback on these issues. When you call us, please be prepared to cite the source, amounts, and dates of the figures you have obtained that are different from FastTrack's. Also, if your nonFastTrack numbers are the result of a computation, please provide the formula the other source is using. We will investigate our own data and formula's even if you cannot provide all the listed information, but may  be unable to explain differences.

  • R - Return of Cap
    The return of capital from liquidations of mutual funds of common stocks. This is a rare type of distribution.

  • U - Current Gain
    This type of distribution is usually associated with an international mutual fund.

  • T - Rights
    This is the offering by a mutual fund or stock company to sell current shareholders discounted securities issued by the company. These rights often have a real value that expires over time. DO NOT ignore a right offering as you will likely lose investment value. Consult your financial adviser for more details.

  • O - Other
    Distributions that do not fit characterizations above.  

  •  Ending Shares - Assuming that you start with one share, these are the number of shares reinvested. FastTrack always starts with one share on the first day.

  •    Projected Dividends - These are dividends that have been announced for future dividends but are not issued yet. They are subject to change. When dividends are distributed ,they could be different amounts and on different dates.

        

     

FT4Web Charts are Adjusted for Reinvestment and Splitsgears.gif (1914 bytes)

Almost all distributions affect the total return of your investment. FT4Web always reinvests distributions in more shares of the same issue effectively changing the number of shares that you own. 

On the FT4Web chart, return computations are always based on a single share at the close of the first day displayed. When a distributions occurs, then FT4Web reinvests the dividend at the close on the X-Date. This mirrors the most common practice for funds and for stocks with DRIP (Dividend Reinvestment Plan). The FT4Web return will hold true even if the "Pay Date" for the distribution is later than the X-Date. When the reinvestment occurs , on a date later than the X-Date or at a price other than the X-Date closing price, then FT4Web's total return will differ.

In summary, the FastTrack database contains all distribution information per share.  Your brokerage statements and the dividends reported at each white dot will agree on the distribution amounts.

But I think your adjustment method is wrong. How'd you do it?MANWORRY.GIF (6328 bytes)

Print the Distribution Adjustment Work Sheet. This document shows  how FT4Web does the calculation.

 

Comparison to Value Line

The section below is reproduced from the 3/6/98 issue of Value Line reports. Note the "Div'd Decl's" enlarged section. Compare that to IBM on your FastTrack screen.  

ibm3.GIF (19308 bytes)

Unlike FastTrack, Value Line reports historical distributions as split-adjusted values. The Value Line totals for a period will agree with FastTrack's totals for the same period WHEN the period ends AFTER the last distribution or the period includes a split. The totals will NOT agree when the period ends before a split. Value Line's  distribution information WILL NOT agree with your brokerage statements, whereas FastTrack's information will agree.

The individual distribution values reported by Value Line will  agree with FastTrack's individual distribution values if there has been no split AFTER the distribution. When there has been a 2-for-1 split, for example,  then FastTrack distribution values BEFORE the split will be double the Value Line reported values. In this case, FastTrack's values will agree with your brokerage statements, Value Line's will not agree. FT4Web's computations are fully disclosed in the FTDIS.CSV file.

Distributions can Affect Price strongly, but have Slight Impact on Total Return

Most distributions are cash removed from the portfolio and paid to you. After the distribution, each share is no longer worth as much. The price of shares decreases by the distribution amount. The decrease occurs on the "X-Dividend Date" designated by the issuer of the share at the market close for the x-day. Usually this is the within a very few days that the issue pays the distribution to you.

A few mutual funds may hold distributions in their own account for more than a couple of days before paying you on a "Pay Date". This causes a problem.  The fund price reflects the removal of the distribution from the x-date closing price, but there is no reinvestment  in new shares or cash payments in your brokerage account. Yet, FastTrack will show the redistribution of those dividends. In fact, FastTrack's Total Return will be a best guess at the actual value of your holding, but it won't agree with the low figure what your brokerage reports to you.

Eventually, you will collect the dividend paid on the x-date even if you sell the shares before the Pay-Date, and at that point FastTrack and your brokerage will show total return that is almost the same. Although the distribution X-amount is removed from your brokerage account, it is still invested in much the same way as your portfolio and as such the net impact on your total return on the Pay Date is usually very small.

Generally, the delay in Pay-Date serves to smooth the process of rebalancing a portfolio. Assets are traded in an orderly manner with buys and sells netting out evenly with a  pad of the unpaid distribution masking some volatility.

Distribution Totals & Yield Calculation

The Distribution summary is displayed when the Dashed Pole is moved to the last day of the chart. The numbers are accurate for the period of the chart's width. When there have been several distributions during the period, the computations for deriving totals and yields are quite complex. The computations are fully disclosed in the FTDIS.CSV file.

Note: Distributions on the very first day of the chart are NOT included in the return and yield computations for the rest of the period. Distributions are applied at the close of market and included in the period when the distribution x-date is the last date of the period measured.

Note: FT4Web's are fully disclosed in the FTDIS.CSV file.

Chart Total - Distribution Summaries

When the Dashed Pole rests on the last date of the chart, then FastTrack computes a summary of distributions. This display can be disabled by right clicking on the chart and unchecking the Div Info Show menu item.

  • One Year Yield= The yield of the most recent one year period. This calculation treats income dividends as distributed (they send you a check) instead of reinvested. This is the same as the spreadsheet Yield1Y amount. Click here for or more discussion.

  • Income reinvested= Total cash distributions for the period displayed. The calculation treats income distributions as reinvested, hence, there are more shares over time and the distribution compounds. This means that Income reinvested=  is, always, somewhat higher than the raw sum of the distributions over the period. This amount is equivalent to the amount on which you would pay taxes as it is the sum of income distributions when such distributions are reinvested. Note: FastTrack allows reinvestment in fractional shares. This is always possible with mutual funds, but seldom possible for stocks. Therefore for stocks, the FT reported Income Reinvested= may be slightly higher than reality.

  • Short + Long CapGains Reinvest= - Total of short + Long term capital gains for the period displayed. The total considers that each distribution is reinvested in additional shares. The amount shown should be deducted from assets before paying taxes when the shares are finally sold. You will have already paid taxes on this amount.

  • Unrealized CapGains: The amount of capital gains that would occur for one share bought at the beginning of the chart if sold on the last day of the chart.

  • Show Tax SpreadSheet: Clicking this menu item produces a detailed, itemized list of distributions suitable for calculating tax liability.  The output is a file named,

                 C:\FT\FT4WIN\TEMP\TAX.CSV

    FT4Web will attempt to open this file invoking  whatever program (usually a spreadsheet program like Microsoft Excel.) you have selected to handle CSV files. From your spreadsheet program, you will be able to view and customize the tax spread sheet calculation for your purposes.

Wall Street's Dirty Little Distribution Secret

We hate to be the bearer of bad news. Wall Street has little secrets that can really mess up your return.

This Closed End Putnam fund shows that it has a 7.28% yield (income dividends). This happens to be a Municipal bond fund, but there are many similar funds which are taxable.

  1.  Unfortunately, a lot of that yield has come from simply handing back your initial capital investment as dividends. Note that the green line (your capital value) continually drops. They are giving back your initial investment as a dividend artificially inflating the yield.
  2. If PMM were held in a taxable account (of course, modify these comments for this municipal bond fund),  you end up paying taxes again on money that has already been taxed once. Note that the green line is the same red PMM fund, but with the FT4Web "ignore Dividends" option selected.
  3. FT4Web reinvests distributions the closing price on the X-Date. But if you have asked your broker to reinvested dividends automatically, then you may not get the save price as used by FT4Web(and other sources).
  4. Watch out! If everyone automatically reinvests at the market "open" price on the same day, the open price may spike up making the automatic reinvestment at a very unfavorable price.

In general, you should NOT reinvest dividends paid by stocks and open end funds automatically. Have the dividends go to cash and use that cash as part of your regular rebalancing plan. Also . . . examine the reasons you own a fund like this carefully. NEVER hold it in a taxable account. This DOES NOT apply to company sponsored DRIP plans for which the company issues new shares, or provides shares from a source (its own holdings) that are not acquired through market trading on the X-Date. See details of your DRIP program.

Final comment: Note that FT shows a capital loss of $4.553 per share. This capital loss may NOT be fully deductible, costing you a sizable (relative to the dividends) loss of income. We are not tax experts . . . check with your own financial consultant as to how this affects you.


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