Cost basis calculation and dividends

[Darka]

I use the cost basis calculation that Gengulphus taught me on a thread of mine on the old Motely Fool site and it's been working great, much better than my old calculation.

Anyway, one of the numbers I like to calculate (for interest only) is how much have I received in dividends as a % of the cost of the holding.

So, the problem I have is that on a share sale, the cost basis of the holding obviously drops, even though the cost per share hasn't changed.

This throws out the dividends as a % of cost basis, as the dividend figure hasn't changed, but the holding cost has reduced so the percentage increases.

I know I'm probably missing something obvious, but I can't see it... unless of course this is correct?

regards,
Darka

[Alaric]

I know I'm probably missing something obvious, but I can't see it... unless of course this is correct?

It's a home made statistic, so you can write your own rules.

I would have thought that if you know the cumulative amount of dividends on a share, then if you sell some, you adjust the cumulative downwards, according to how much you sold. You could group the "sold" cost and the "sold" dividends as the historic record of a disposed stock.

Another approach would be to restart the clock by treating the new acquisition cost as the value of the stock retained.

[Darka]

It's a home made statistic, so you can write your own rules.

Good point, will have a think about what makes the most sense to me, thanks.

[tjh290633]

Like you say, when you sell a share, then the portfolio cost reduces. If you like, this can lead to a negative cost. The same applies to a share which repeatedly returns cash to its holders, leading to the time when you have received more back that you spent in the first place. Imperial Group IMB, formerly IMT, is one such, since it demerged from Hanson.

TJH

[YeeWo]

Like you say, when you sell a share, then the portfolio cost reduces. If you like, this can lead to a negative cost. The same applies to a share which repeatedly returns cash to its holders, leading to the time when you have received more back that you spent in the first place. Imperial Group IMB, formerly IMT, is one such, since it demerged from Hanson. TJH

XIRR calculus in excel is far and away the best way to cope with negative cost holdings. XIRR has totally transformed my thinking........