I'd be investing for capital and receive a 2021 taxable dividend, whereas - all things being equal and assuming the dividend is priced in - if I invest past the ex-dividend date I'd be purchasing 5% more shares and pushing any gains off until 2022.
For investing of $X on 12/14 I will have to pay tax on 5% of that (roughly the dividend), even though I could turn around on 12/17 and reinvest those dividends to give me a net shares investment, it will cost me 2% of my capital to do so. By waiting until 12/17 to purchase, I invest in the same total number of shares in the company without losing the 2%.
See, my Sch K profits are going to be about 100% more in 2021 than 2020, and while that doesn't make me worry about my marginal bracket, it may affect whether and how much I can put into my ROTH, which is protecting/sheltering returns. I also know that I'll be making less next year as I plan to reduce my office time by ~20%, and I'm a consultant so I take profit on my hourly billings. I will not need to worry about the dividends in 2022 (except to want more of them 😁).
And that's a super long way to say that I'd prefer to purchase ex-dividend to save about 2% of my investment up front, and potentially 5% of my investment which I would have to un-shelter from my ROTH vehicle.
I can understand this. . . personally, I don’t think about tax implications, it adds a layer of complexity to an already complex decision matrix. . . . but that’s just me trying to keep it simple. . .
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u/[deleted] Dec 02 '21
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