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Tracking and reporting investments with dividends correctly

Waleed

Quicken 2016 Home & Business (and Premier) does not track investments with dividends correctly when reporting yield.

As an investor, I want to look at total return for any particular security, and that includes dividends, reinvested dividends, and capital gains. Quicken does not seem to include dividend actions when calculating Yield or Gain/Loss.

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Comments

q_lurker

Depends a bit on where and exactly what you are looking at. There are a several 'Yield' presentations. Some are calculated by Quicken based on your transactions, some are calculated based on your data supplied (Estimated Income), come are downloaded and thus independent of your specific data. See the help information such as

You can also find more specifics about each through the help file glossary.

In general, I find the Average Annual Return calculations in the Portfolio view or through the Investment Performance Report to be the mose comprehensive presentation of total performance.

HTH

Waleed

Thanks. My version of Quicken H&B 2016) doesn't show the table you included. I can get to Investing - Monitoring portfolio performance, but there is no topic for "What do I need to know" Is there some other way to get to it? I am in Quicken Help.

I know about the various dividend specific calculations.

What I am looking for is the total return on an equity based on cost of purchase, dividends reinvested, and dividends in order to give me a sense of whether I am in a net profit position. A DRIP resulting in additions to the position at a lower cost should change the cost basis for the stock.

The NAV may go down, but when dividends are included, the position may still be worth holding. I want this as part of my normal Portfolio screen, not as a report, as I use this as a trigger for trading.

Tom Young

The page that q.lurker posted is in the Quicken "Help" file. Click "Help" > click "Quicken help" > type "Portfolio columns" in the find box and select the first item that's found. There's tons of information in the Help file about investments but you sometimes have to thrash around a bit to find it.

"What I am looking for is the total return on an equity based on cost of
purchase, dividends reinvested, and dividends in order to give me a
sense of whether I am in a net profit position. "

The sentence is a bit of a fruit salad. "ROE" can be positive while you have a net loss, and visa versa.

Simply looking at the security in Portfolio view or via the "Holdings" button in a particular Account will tell you if you have a profit, or not. The Investment report "Investment Performance" will create an Internal Rate of Return figure for any given security over any given period of time. This latter number allows you to measure which security has performed the best over time.

Bob_L

Have you tried ROI(%) in portfolio view? That may be what you are looking for.

q_lurker

You also need to expand out (click on) the "What are portfolio calculations based on?" hyperlink.

A DRIP reinvestment does add to the cost basis of the entire holding, but in doing so, it may raise or lower the average cost basis per share depending on whether the latest reinvestment was cheaper or more expensive that prior acquisitions.. That average cost basis per share is not really relevant. (I say that since I do not use average cost basis for mutual funds. YMMV)

The Average Annual Return (aka Internal rate of return) considers all dollars returned from an investment (dividends reinvested dividends, interest, realized gains and losses, return of capital, etc) and the timing of those returns along with the market value change (unrealized gains/losses) to produce a single value for the time period of interest measured off of value at the beginning time point. One is thus able to rationally and fairly compare different investment types - a CD vs a growth (no dividend) stock vs a REIT vs an index fund.

You can customize one of the "Custom" portfolio views or better (IMO) save a customized Investment Performance report fo your Quicken tookbar for quick access

unknown

Unfortunately, you haven't addressed the question as to why Average Annual Return which you say you favor doesn't include reinvested dividends (it clearly doesn't). Neither does the return of any indices (INX, DJIA, etc.), but we still don't get a comparison of actual average annual returns.

unknown

If you look at the Quicken Performance Report, there is an asterisk that clearly states that Average Annual Return on accounts does not include dividend reinvestments or dividend returns. This is a clear short-coming as the original questioner notes.

Tom Young

I'm not seeing that asterisk on my "Investment Performance" report generated by Quicken Premier 2016, but clearly a transaction that's reported as a "ReinvDiv" in Quicken doesn't need to be included in the "Investment Performance" report. That's because the two "legs" of that transaction:

You receive a cash dividend
You decide to invest that cash in new stock

both happen on the same day. On that day there's no "net" cash flow so there's no need to report the transaction. The new stock is however included in the "End Mkt Val" on that report and that's where the new stock enters into the calculation of IRR.

A few years ago Schwab stopped using the ReinvDiv action for most stocks where you signaled to Schwab that you wanted dividends reinvested in new stock. Now you see a dividend on the day of the distribution and you see the reinvestment occurring on the following day. In this situation the "Investment Performance" report does spell out both legs of the transaction.

unknown

If you hit the Performance tab on the Portfolio view, you will see the asterisk. The performance number for Annual Rate of Return (IRR) for whatever time frame you specify (1, 3, or 5 years) will be the same as that for similar periods in the Investment Performance report from the Reports drop down menu--neither includes reinvested dividends in the rate of return, just as the indices return figures do not. This means that unless you know your portfolio dividend rate, you cannot compare your returns to indices' returns with dividends included. You can figure it out approximately on your own, but the performance reports in Quicken won't tell you, and it's still a short-coming.

unknown

So, Tom, the Investment Performance report does not spell out both legs of the dividend transaction as you state. Sorry, but it doesn't as you can see if you compare the same figure from the Investing> Portfolio view> Performance tab where it clearly states that the return figure does not include reinvested dividends. Fidelity online performance reports also do not include reinvested dividends in accounts' performance; apparently, they and Quicken find the calculations too complex to bother spending the programming time and money on.

markus1957

The asterisk statement refers only to reinvested dividends for the Indexes marked with asterisks; S&P 500 is apparently the only index that takes dividends into account in the 1, 3, 5 year return calculations.The calculation used for IRR is explained in a Help window by clicking the hypertext link below the asterisk statement.

Tom Young

"If you hit the Performance tab on the Portfolio view, you will see the asterisk."

I don't think I've looked at that view very often but I do see the footnote for the Nasdaq, DJI and Russell 2000.

"The performance number for Annual Rate of Return (IRR) for whatever time
frame you specify (1, 3, or 5 years) will be the same as that for
similar periods in the Investment Performance report from the Reports
drop down menu--neither includes reinvested dividends in the rate of
return, just as the indices return figures do not."

The way I interpret this is that the "growth of $10,000" numbers for the indexes assumes that you simply pocket the dividends, but the Investment Performance report certainly does include the reinvested dividends in the ending value figure even though it doesn't show them as "transactions." So, yes, the comparison is a bit of a fruit salad, but the defect is on the side of the indexes, not on the Quicken calculation.

unknown

No, Tom, the Quicken performance report does not include dividend reinvestments. Look again, the asterisk is there and says no.

unknown

It includes the dividends on the account and portfolio value, but not in the IRR.

unknown

Markus, there is another asterisk below the potlrtfolio and account performance figures on the Performance page that is reached from the Investing>Performance tab onthe menu bar, and it indicates that the performance annual rate of return does not reflect portfolio dividends. Neither does the S&P 500 figure even though that page doesn't so indicate (you can see this is so by comparing it to easily available data (Yahoo finance, for example). Quicken is limited in the way I am reporting.

markus1957

No, it just again references that the indexes in that section that have asterisks do not include dividends.

mshiggins

Seems like a someone should post a screen capture.

unknown

Screen shots would settle it but also give a lot more info than I want to post online. Here's a link to a calcultor for S&P 500 returns with and without dividends for any month over month period you enter.: https://dqydj.com/sp-500-return-calcu.... It is easy to verify that the Quicken rate of return calculations do not include reimvested dividends for any of the indices you can choose or for our own accounts or portfolios rates of return. You can enter a column that will tell you the dividend rate of your positions, but the rate of return calculations don't reflect dividend returns.

q_lurker

The contentious Investment Performance picture:

The cited sentence is highlighted at the bottom. The first three indices have the asterisk pointing to the sentence. The fourth (S&P 500) does not.

The snip from the Investment Portfolio view (exactly the same values):

The Investment Performance Report for the same one year period for the first IRA account (14.54% AAR). Other accounts and periods can be similarly shown.

No Reinvestment transactions are shown in the report for the reason Tom Young previously explained. The performance result of the reinvestment is included in the End Mkt Value. One can also effectively 'prove' that inclusion by simply deleting the Reinvestment transaction from the transaction list and seeing the consequences. The reinvestments are being included in all three of these presentations.

Looking at your citation for S&P performance, the July 16 to July 17 data yields a 12.857% no-reinv value and a 14.966% reinv value. That no reinv sounds closer to the Quicken 1 year of 11.40% than does the reinv value. Likewise the July 14 - July 17 3-year period 7.119% or 9.266% vs Quicken's report of 6.82%

I am seeing that Quicken is calculating the AAR with reinvestments for my portfolio performance and I am believing that it is reporting the S&P 500 performance without dividend reinvestment - just as the starred footnote suggests.

q_lurker

The contentious Investment Performance picture:

The Investment Performance Report for the same one year period for the first IRA account (14.54% AAR). Other accounts and periods can be similarly shown.

unknown

Q.Lurker and all:

As q.lurker's exploration proves, the Quicken figures for return for S&P and other indices (I can't vouch for the graph) do not include the added return from dividends (as is also the case for our account and portfolio return numerical figures). Here's why the ARR numbers for our accounts cannot include the gain from dividends (I can unpack the 'fruit salad' Tom mentions conceptually even if the math is too stale in my brain to represent in a formula): As Quicken's own notes on their calculations reveal, annual rate of return does not include dividend reinvestment transactions because they add to the cost basis and are represented in the account values (shares and final value) that are part of the return equation.

Here's the problem or limitation with that reasoning/accounting: Dividend returns are conceptually free, they don't have a cost other than taxes and are a benefit of the shares you already own, and they should be attributed as percentage gains to the original shares and thereby increase our rate of return. If the dividend reinvestments add to the cost basis but their gain is not attributed as an increased percentage value to the shares they are based on, this fact is lost in return figures. It is an IRS accounting convenience that they add to cost basis as well as a truth that we have additional shares going forward. When you see data (as in the link I provided) reporting S&P or other indices with and without the return rate of dividends reinvested, the math gets very complicated as to attributing the return to which shares given various time periods and share additions and almost endless combinations of calculations over time. Nevertheless, it can be done and can be fairly accurately approximated as explained in the link I provided. Various sources report historical returns of the overall stock market and indices representing it with dividend returns figured into the annual compounded rate of return.

Quicken does not represent dividends as a percentage gain, so we have to approximate our dividend rate and compare it to the dividend rate of whatever indices or market sectors we want to compare our performance to. In the original question of Waleed, you can only compare individual stocks gains by the same sort of back-of-the-envelope calculations. Quicken will give you the transactions on the individual stocks and can give you a column with their dividend rates, but Quicken does not and cannot give you the comparison of rate of return including dividends given how they calculate average annual rates of return.

markus1957

"Dividend returns are conceptually free, they don't have a cost..." That is only true until they are used to purchase a security, be that re-investment or otherwise. As soon as they are used to purchase a security they have a cost and contribute to market value which then becomes the determining factor in computing rate of return.

An example in its simplest form is a money market fund fixed at $1 per share with re-invested dividends. Brian's argument would lead to Quicken reporting zero IRR because reinvested dividends would not contribute to return. That is simply not the case. My MMF reports a 0.59% return over the last 12 months, close enough to expected and far enough from zero that I'm not going to sweat any potential minor deviation from a purist calculation.

Adding- reviewing an Investment Transactions report provides a sense of how Quicken is allowing for the return associated with a reinvested dividend to be incorporated into the IRR calculation.

unknown

Unfortunately, money market returns are almost nil, dividends are not, so that the divergence over time in how Quicken calculates returns can be quite large as the link I provided can demonstrate (as is also demonstrated by historical market return data with and without dividend returns included that various academics and institutions report).

Here's a more telling example. You have 100 shares of X worth $10 per share on Jan 1 and also receive a dividend of 10 shares of X on Jan 1 worth $10 per share. At the end of the year the shares are worth $20 per share or $2200. What is your annual rate of return? Quicken would tell you that it is 100% and the percentage gain would be different if the dividend was received later in the year and worth less or more than $10 per share and yielding less or more shares in Quicken's accounting. But your rate of return on the original 100 shares is actually 120%, not 100%, in the first example. With dividend rates of 2-3% not being uncommon these days and occurring at different times during the year, the divergence can become quite large between Quicken's calculations and those based on more sophisticated formulas that attribute gain to the shares the dividends were based on and then add the shares of the reinvested dividends going forward and calculate the gains of the combined shares going forward. As long as we are comparing apples to apples it may not matter, but you aren't getting a very sophisticated representation of how well your investments are doing relative to reports and calculations of broad indices that do report the gain with and without the percentage increase in gain from dividends. Why be individual investors if we can't really compare. Quicken does a better job of this than most calculators, but it is limited in the way that I am pointing out. When I add the data of dividend rates for the various positions I have as Quickens portfolio view allows me to do, and then compare my dividend rates to indices dividend rates, I am reassured that I am probably beating the indices' average annual rate of return with dividends reinvested, but I have to calculate this, Quicken does not do it for us.

unknown

Markus and all:

You can 'prove' what I am saying by customizing Portfolio View to include "1, 3, and 5 year Return %," a metric Quicken notes does include dividends, capital gains, capital returns, timing of dividend repurchases, etc., in the percent return reported. For positions which you have held for those time periods, you will see that the 1, 3, and 5 year "Return %" figures are substantially higher than "Average Annual Return %" for any of the time periods. Unfortunately, this "Return %" figure cannot be reported for accounts and portfolio values or for ETF's or included in a customized period-over-period performance report. It is only available for individual stock positions as far as I can determine. Clearly, the calculation formulas are different. Both "Return %" and "Average Annual Return %" are compounded rates of return for the 3 and 5 year periods.

Quicken notes that Average Annual Return (IRR) does include cash dividends (this accounts for Markus' and our MMF gains and for some representation of dividends in IRR performance data), but Quicken only includes dividends reinvested in a kind of blunted calculation of added shares and added cost basis.

As stated in the Quicken Help definition of Average Annual Return (IRR): "Return represents the total return of a security: the current market value, plus the income taken out as cash, plus cash received from sales of shares, minus the amount invested.

Reinvestments are not explicitly added to the return, because they contribute to the market value, which is already factored in."

The differences in "Return %" and "Average Annual Return % (IRR)" in Quicken are large and meaningful and are not just theoretical or just an issue of purity.

unknown

An amendment: Sometimes Return % is higher and sometimes lower than Average Annual Return (IRR) over a time period for a stock, presumably because of the timing of the reinvestment and swings in the market over the time period, but in consistently rising periods, it is always higher. Again, it (Return %) represents dividend reinvestments more accurately than Average Annual Return (IRR) does in Quicken, and the differences can be substantial. All metrics and formulas give a different picture or view of reality, and I, for one, would like to see Quicken's calculations of Average Annual Return (IRR) represent the reality of dividends and their reinvestment and the contribution of both to real-world return performance in a more complex, more complete manner.

Bob_L

"but Quicken only includes dividends reinvested in a kind of blunted calculation of added shares and added cost basis. "

IMHO, there is nothing "blunted" about the calculation of IRR in Quicken. In fact I believe it is a more meaningful way to look at how an investment has performed as opposed to using other accounting type measures.

Your discussion does bring up interesting points insofar as to exactly what the index returns really mean. I guess I never really gave it much thought because I simply compare the IRR of my own index 500 fund to my individual securities if I want to see how I am doing relative to that market measure.

unknown

That's reasonable in theory, Bob, but Quicken doesn't report your SPY IRR the same way that, say, Fidelity or other large institutions or the press report indices' performance with dividends reinvested, and the Quicken calculation has the same limitations I have been referencing for SPY as it does for the overall portfolio or account or security performance IRR numbers. So, again, especially given the varying time periods in which you might have been invested in and received dividends for different positions, you aren't really getting a very accurate comparison unless everything was bought at the same time and held for identical periods and received dividends in the same percentage amounts on the same dates. Quicken is consistent but inadequate for SPY as well as for your other securities, so the comparison is suspect and confusing if we try to compare to published data of returns with dividends reinvested. Wouldn't it be nice if we could more easily compare to rates of return reported in financial publications and by financial brokerage institutions (not everyone holds SPY in their portfolios either).

You might note that your SPY position has different IRR values than the S&P 500 index, INX, reported at the bottom of your performance screen in Quicken (and by amounts that are greater than the divergence noted in published reports of SPY with dividends reinvested and the "index that you cannot buy" with dividends reinvested for which INX is a stand-in).

We are always making decisions under conditions of uncertainty and with approximate models of reality, but it would be nice to have clearer metrics that are consistent with the academic and financial reports of market performance so that we can see our way a bit more clearly. There is nowhere we can see our portfolio performance in Quicken in a way that matches the financial institution reports of the performance of broad market indices with dividends reinvested.

By the way, Fidelity's performance data for accounts and portfolios and positions also lists the caveat that your rate of return includes dividends, capital gains, etc., "but not their reinvestment," so they are no better than Quicken in this regard.

Jim_Harman

At the risk of further muddying this discussion, I would like to point out that on the Investing Performance page, there should also be an asterisk next to the S&P 500 Index, indicating that it does not include reinvested dividends.

If you go to the Security list and view the Security Details for the S&P Index, you will see that the data is for ticker INX, which is the price-only version of the S&P 500 index.

There is a different index SPXT which tracks the total return (including dividends) of the S&P 500. If you set up a security in Quicken using the ticker index:spxt, it will be included in the list of indexes available on the Investing Performance page.

unknown

Very helpful, Jim, supports what I have been saying about INX, and clearly illustrates the difference between an accurate total return and the way Quicken calculates IRR. I am pleased to add SPXT to my indices and will struggle to figure out how I am doing in relation to it by roughly averaging my positions' dividend rates and adding them to the IRR Quicken gives me. I didn't realize we could add indices and will look to do so for other market indices.

Bob_L

You may have a point if your reference model is reported financial indices, but it isn't clear to me that even they are true cash rates of return, as your link points out. I want to know what my cash return is, and IRR gives me that.