What Does M1 Finance Do With Dividends!
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Financial Investor is affiliated with M1 Finance, but the relationship does not influence our opinion of this platform.
M1 Finance’s main focus is on passive investing and building your wealth in an automated environment. As a self directed investor you can choose from thousands of stocks and ETFs some of which, if held pay out a dividend within your portfolio. This brings up a few questions , “What are Dividends?” & “What happens to my dividends?”
Dividends offer a return of capital to the shareholder for holding the stock within their portfolio, you do not have to sell the stock to receive the dividend. This allows the investor to re-invest their dividends back into their portfolio, which can decrease unit cost, increase yield on cost, increase your dividend income and future capital gains.
I built a free google application called Simple Dividend Calculator, which can be used to calculate your new principal and dividend payout over a specified time period.
M1 Finance DRIP or FRIP?:
M1 Finance does not DRIP (Dividend Re-Investment Plan) in the traditional sense. It acts more like FRIP (Fractional Re-Investment Plan), it takes your dividend payments and holds all dividends as cash in your account until the value of your cash reaches $10. Once your total amount of cash from deposits and dividends reach $10, M1 Finance automatically reinvests the capital into your portfolio. This allows you to build your wealth using the power of compound interest, without having to manually invest the shares yourself.
Ex-Dividend & Payable Date:
Ex-Dividend Date, is the date you must own the Stock or ETF in order to receive the upcoming dividend. That means you should of purchased it at least 1 day prior to the ex-dividend date, in order to be eligible for the upcoming payout.
Payable Date, is the date you will receive payment for holding the Stock or ETF. Payable dates can range between a week to around one month after the ex-dividend date. These are shown inside M1 Finance, by selecting the Stock or ETF details.
M1 Finance Earned Vs. Paid Dividends:
Earned Dividends will show up within M1 Finance under “Gain” in your portfolio. These are dividends you have “Earned”, while holding the security through the Ex-Dividend Date, not the total amount you have been paid. By following the steps below, you’ll be shown the total dividends you have earned over the period selected.
Paid Dividends are a bit different, these are dividends you’ve been paid and have received in cash, these show up in your activity feed when they are paid, as shown below.
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I am not a Financial Adviser or Tax Professional the information provided is my opinion for entertainment and fun. This is just me a Financial Investor trying to help others make their money work for them.