Correct way to enter dividends that get automatically re-invested (DRIP)

I entered all of my dividend re-investments in Quicken in 2 steps. I couldn't figure out how to get it to work in just one step. Now that I'm starting to feel a little more comfortable with working with the Investments section, I would like to go back and correct my mistakes and re-enter everything correctly. Here is how I entered the re-invested dividends.

1. Inc-Income(Div,int, etc). I put in the Gross amount of the dividend and then put in a negative number down below under Miscellaneous since there is a fee every time the dividend gets re-invested. For example: Dividend: $3.58, Misc: -.23 and then I record the fee under a category I created called "Computershare recordkeeping expenses" and clicked on "Affects Investment Performance" on this category.

2. Once I have completed Step #1, I now have a cash balance in the account. I then do a second step. "Buy Shares" where I enter the number of shares bought and the total price equals the Net Dividend.

Should I be doing this a different way to enter re-invested dividend correctly?

Thank you!

Answers

  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    As I recall that is the only approach when fees are involved. 
  • Sherlock
    Sherlock SuperUser ✭✭✭✭✭
    You are doing it the correct way.  The Reinvest - Income Reinvested wizard does not handle the fee appropriately.
  • Cindyc
    Cindyc Member ✭✭
    > @q_lurker said:
    > As I recall that is the only approach when fees are involved. 

    I have another account that does not charge a fee with each dividend and I am able to to record the dividend re-investment in one transaction. Thank you for verifying how I recorded it.
  • Cindyc
    Cindyc Member ✭✭
    > @Sherlock said:
    > You are doing it the correct way.  The Reinvest - Income Reinvested wizard does not handle the fee appropriately.

    Thank you for verifying this method.
  • Rocket J Squirrel
    Rocket J Squirrel SuperUser, Windows Beta ✭✭✭✭✭
    edited March 17
    There are differences of opinion on how to handle reinvestments. I would choose a different approach.
    Quicken maintains a per-security quantity called Amount Invested. This represents money out of your pocket to buy the security. A Buy transaction increases Amount Invested. A ReinvDiv (or other Reinv transaction) purposely does not. Amount Invested figures into the calculation of some of Quicken's Return calculations, such as ROI. Using Div+Buy instead of ReinvDiv will skew some Returns because Amount Invested is higher than it should be.
    As long as you're willing to live with 2 transactions per reinvestment, I'd suggest the first transaction be a ReinvDiv and the second transaction be a MiscExp to handle the fee with your chosen category.
    Quicken user since version 2 for DOS, now using QWin Premier Subscription on Win10 Pro.
  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    @Cindyc -- addendum

    In looking at some similar questions from the past, it appears to me that the basis for the shares you 'bought' or received through the DRIP can be treated as the full dividend amount.  The Compushare fee can be treated as a commission, part of the acquisition cost for those shares.  Using numbers, the basis can be treated as $3.58 rather than $3.35.  Your method which I endorsed above produces the $3.35 basis. 

    Consult Compushare or your tax adviser for real advice.

    If that is the case, you can go with either a straight Reinvestment transaction (like your other accounts) or with the Div & Buy approach skipping the MiscExp transaction.

    Other similar posts (an incomplete list):
    https://community.quicken.com/discussion/7874440/what-is-the-best-way-to-enter-a-reinvested-dividend-with-a-service-charge-or-commission
    https://community.quicken.com/discussion/7723517/drip-fees-where-how-to-record
    https://community.quicken.com/discussion/7869189/entering-historical-dividend-reinvestment-transactions-in-quicken-2020     
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