Converting Dividend+Buy Transaction Pairs to Reinvested Dividends

Some brokerages represent a reinvested dividend as a 2 transaction process: a dividend transaction and a separate buy transaction. Technically, this is correct and is what tax authorities (at least the IRS in the US) consider has happened in the case of receiving a reinvested dividend.

However, from the investor's perspective, a reinvested dividend is a single action. We don't make a conscious choice of whether to purchase shares or not with every dividend received. Nor do we control the price at which the shares are purchased. Once we have signed up for reinvesting dividends (such as through a DRIP) the brokerage automatically handles the purchase and pricing for us. 

So it typically makes more sense to the investor to see reinvested dividends represented as individual transactions, rather than as 2 separate transactions (a dividend and a buy).

If you are manually managing your portfolio in StockMarketEye, you can choose to enter a single reinvested dividend transaction or a dividend and buy transaction pair. However, using the brokerage import or importing data from financial data files (QIF, OFX/QFX), the transactions are specified by the brokerage and depending on how they have decided to represent the action, you may receive a dividend and a buy transaction, rather than just a single reinvested dividend transaction. For example, ETrade and Schwab provide separate dividend and buy transactions; Vanguard provides a single reinvested transaction.

StockMarketEye provides a feature that can detect paired dividend and buy transactions (as well as paired capital-gain and buy transactions), and then convert them into a single reinvested dividend transaction. You can run this feature from the Transactions report (see below).

Convert to Reinvested Dividends in the Transactions Report

To run the conversion feature on the transactions found in your Transactions report, click on the report's More menu and then on "Convert Dividend+Buy pairs to Reinvested Dividends". 

Note that this feature is only available in a portfolio's Transactions report. It is not available in the Transactions report of a Portfolio Group.

The "Convert Dividend+Buy pairs to Reinvested Dividends" window will open and has a short explanation about the feature.

When you are ready to perform the conversion, click the "Convert" button.

After the conversion has completed, the dividend+buy pairs (as well as capGain+buy pairs) will have been converted to reinvested dividends.

Notes on the Conversion

  • For this feature a dividend and buy transaction are considered a reinvestment pair if they occurred within 4 days of each other and their total values are identical.
  • A dividend+buy transaction pair is converted to a reinvested dividend transaction. A capitalGain+buy transaction pair is converted to a reinvested capital gain transaction.
  • If you are using the brokerage import in a portfolio where you have also converted the dividend+buy pairs to reinvested dividends, some of the original Dividend transactions may be re-imported the next time you update from brokerage. You can either uncheck those Dividend transactions before importing or delete them after importing.
  • After the transactions are converted, the Prices view of the portfolio is rebuilt from the transactions
  • You may wish to make a backup of your data before converting, if you are concerned about the effects it will have on your portfolio.
  • In the Prices view, the TR% column of multi-items that have reinvested dividends will be higher after the conversion than before. The reason is the way TR is calculated. TR is calculated as: (MarketVal + Div&CapGain) - CostBasis. TR% is calculated as: (TR / CostBasis) * 100

    For multi-items, the Div&CapGains includes only cash dividends and capital gain transactions.  Likewise, for multi-items, the CostBasis does not include the cost basis of any positions that were the result of reinvested transactions.  This is because the CostBasis (for use in the TR calculation) should only include items that were paid for out-of-pocket. Reinvested dividends and CapGains are gains, not expenses, and so are not included in the CostBasis for multi-items.

    So the TR values (i.e. the dollar amounts) remain the same, but because we've changed the denominator (i.e. CostBasis) to be smaller, the TR% values will be slightly bigger. 

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