"Will Trice" <wwtrice[at]paragondynamics.com> wrote
- quote -

No, but the tax basis of the original issue changes, and one will want to
note the cost basis of the new issue. It's simple arithmetic.

Company web sites these days seem to always have a good explanation of
allocating the basis, often including an example. Typically they also often
include a history of changes in the basis. In addition, companies typically
mail shareholders information about the change to the cost basis.

Will Trice wrote:
- quote -

Lucky you! It's a pain in the neck. Usually the spin-off itself gets
tax-free treatment, but there is some tax accounting to do. You need to
allocate cost basis between the parent shares and the spun-off company's
shares. They companies provide info on how to do it. It's usually
something like, you know, 78.445% of your cost basis to parent, balance
to spun-off co.

Also as part of that you often get "cash in lieu of fractional shares"
(CIL) and that generates a small reportable transaction on Schedule D.
If you were entitled to get say 10.445 shares of the spun-off company
you'll only get 10, and get CIL for the 0.445 shares. You report a sale
of the 0.445 shares on the CIL payment date on Sch D.

Of course in a tax-deferred account you don't need to track any of this,
cost basis doesn't matter and there's nothing to report on Schedule D
when you sell things.

-Tad

Elle wrote:

- quote -

For what it's worth, spinoffs are often treated legally as a "stock
dividend". I've never had this happen to me in a taxable account, so I
wonder if the receipt of shares of a spinoff is treated just like
receiving a dividend for tax purposes?

-Will

"Tad Borek" <borekfm[at]pacbell.net> wrote
- quote -

I agree with your concern about how spinoffs etc. are taken into account.
I checked on one recent spinoff to see what Yahoo does.

Merck spunoff MHS around August 2003. Yahoo's historical price etc. tables
for MRK reflect this as a dividend. I think this is okay for the sort of
examination I am proposing. If I am picking stocks, red flags (of a sort)
should go up when I see a sudden, very large dividend increase. It may
simply signal a spin-off, and should not be anything I expect to repeat
again in the next quarter.
For mergers, anecdotally I note that this past April or so, the real estate
investment trust CLP merged with (or absorbed; I forget the exact nature of
the deal) TCR. TCR no longer exists. Yahoo's tables and graphs do not
reflect CLP's merger per se. I'm not sure they should: Doesn't the actual
stock price (in the case of mergers) say it all? On the other hand, I
suppose it may depend on the details of the deal. Perhaps some may be (and
are) quantified as a kind of split.

- quote -

I appreciate your comments, but I don't think I'm actually in need of the
kind of precision you seem to be inferring here.

I do suspect Yahoo's graphs take into account the effect of spinoffs etc. on
stock prices via counting them as a dividend. This is because, as Bucky
noted, "dividends" (which with some generosity is perhaps an appropriate
label for "spinoffs") are taken into account with the adjusted close price
in it historical tables. These in turn I would presume are used for the
Yahoo graphs, too.

As for the accuracy of finance.Yahoo in general: I certainly routinely find
important blunders on it. Based on what I've seen there as a DIYer who does
very quick checks of this and that with finance.yahoo, it should certainly
not be the only tool in one's arsenal of stock etc. analysis tools. It
should not be presumed to be spot-on accurate.

Elle wrote:
- quote -

Elle,
I don't know about KO via yahoo but I've found plenty of discrepancies
when looking at very-long-term histories using online quote sources.
They pull from only a couple databases so I imagine the problem is there
for many of them. I just pulled up KO via WSJ.com and those $30/share
dividends in the 1950s look great (4000%+ of stock price)...if only!

It seems that splits aren't accurately reflected once you go back too
far (how far? question for the data provider). Or perhaps it assumes
quarterly dividends when sometimes they were paid only annually.
Spin-offs and mergers are also an issue and they don't seem to adjust
well for them. Eg Megacorp selling at $30 and paying $2 dividend spins
off Minisub and the adjusted price for Megacorp is, say, $24 after the
distribution. If the chart-generator app adjusts prices backwards for
that spinoff (which it needs to, so it doesn't show a 20% drop) it seems
to look at dividends at face value - ie it quotes a yield of 2/24 =
8.25% going backwards, even though that wasn't the yield pre-spinoff.

I don't know a solution for someone who wanted to do this kind of
long-term analysis (and didn't have access to the CRSP data set),
perhaps one of the publicly available academic databases? MIT used to
have one through Sloan but I haven't seen that in years. RE: specific
providers, it's worth checking directly w/them to see exactly what
they're showing in div histories, if you're looking back that far.

-Tad

Bucky wrote:
- quote -

I did some more digging into this and found the exact formula used for
the Yahoo adj close:
http://help.yahoo.com/help/us/fin/quote/quote-12.html

Basically, it's assuming reinvested dividends. I checked the 10-yr
total return for Fidelity Magellan FMAGX. Taking the adj close on
12/31/2004 compared to 12/31/1994, I got an annualized return of
(103.5/39.22)^(1/10)-1 = 10.19%, which is pretty darned close to the
published value of 10.16% on their prospectus. So apparently, the
adjusted close is very useful for total return. (I haven't verified for
other stocks though).

But still, this value is not good for determining yield. I wish they
had another column for just split-adjusted close.

Elle wrote:
- quote -

Yes, I was able to confirm that the "dividend" numbers are
split-adjusted. I checked the values for Chevron (CVX), which had split
2:1 in Sep 2004. The August 2004 dividend according to Chevron's
investor site said $0.80, whereas Yahoo History said $0.40.
http://investor.chevron.com/ireye/ir...;div_hist.html'

- quote -

To get the yield, you only want the split-adjusted dividend divided by
split-adjusted close. As you said, the Yahoo adjusted close not only
adjusts for splits but also subtracts off dividends. So if you divided
Yahoo dividend by Yahoo adj close, it's going to be slightly off. It's
going to be a lot closer than using the non-adjusted close, but it's
still off. And the further you go back, the more it'll be off because
it's adjusting for more and more dividends.

Personally, I don't find the Yahoo adj close that useful (or maybe it's
just that I haven't figured out to how to use them), I wish they
provided a column for just split-adjusted close.

Finance.yahoo.com 's "Historical Prices" site lists numbers for dividends
going back to the 1970s or more for many companies. To compute the dividend
yield for a given year way back then, do I divide the given "Cash Dividend"
number by the "Adjusted Close" number? The "adjusted close" number is said
to take into account dividends and splits.

Doing this is the only way I come up with realistic (ballpark-wise) dividend
yields for the 1970s for the several large, well-known dividend paying
companies I've been checking. (I know the S&P was paying a dividend yield of
around 3 to 5% through the 1970s, so this range is my quick benchmark for
this investigation.)

- quote -

the actual dollar figures per share paid to shareholders back then (in the
1970s)?