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kpbarbee
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Architect and entertainment design specialist; investor since age 12.
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  • Using Yahoo's Historical Data On Dividend Reinvestment Analysis 2 comments
    Mar 25, 2012 2:01 AM | about stocks: ARLP
    As a newbie to Dividend Investing, I worry that I am not doing calculations and analysis correctly. I'm a creative professional, so while I understand the theories behind reinvesting and the wonderful effects of compounding, I think it's wise to check in with greater minds to validate my approach.

    Therefore, I've put together this blog post on my methodolgy to solicit advice and suggestions, as well as to find out if I'm making any errors in my assumptions and calculations.

    Methodology
    Once I find a potential candidate for my dividend portfolio, I like to do my own back testing of a theoretical $10,000 investment. To do that, I use Yahoo's historical stock price data. I download all of the data available on a stock's price and its dividends, open them in a spreadsheet, and calculate the results. I use the monthly prices (actual closing prices, not adjusted prices) and ignore the inital commission. For the purposes of this blog post, I'll use ARLP as an example.

    My theoretical $10,000 investment starts on 8/17/1999 with a purchase of 646.4 shares at the price of $15.47. In my spreadsheet, I import the dividends from Yahoo, sort them by date (along with the monthly closing prices), and use all dividends received to purchase additional shares. I do this for every dividend distribution through the duration of the available data.

    Results
    Twelve years and nine months later my original investment has grown 827.1% to $92,710.51. That's an average APR of 64.87%. The dividend growth rate was 12.73% over the period, and reinvested dividends accounted for 47% of the growth in value of the investment.

    Questions on Using the Adjusted Close Data
    I see this ambiguous "adjusted close" price in the Yahoo data that supposedly the closing prices to account for stock splits and dividends. Using that price, I find that buying $10,000 worth of shares using the adjusted close on 8/17/1999 I would have received 3,144.654 shares. Simply using that number of shares and multiplying by the adjusted close on 12/1/2011, the value of the investment would be $234,685.53, or 2,247% gain, an average APR of 176.2%.

    That's quite a difference between the two calculations.
    Which calculation is "right," using the actual closing prices as I have done or using Yahoo's adjusted closing price?

    Link to Spreadsheet
    The spreadsheet is available on GoogleDocs by clicking this link.

    Thanks much for reading!

    Disclosure: I am long ARLP.

    Themes: Dividends, DRIP, Yahoo Stocks: ARLP
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Comments (2)
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  • Lucas Krupinski
    , contributor
    Comments (596) | Send Message
     
    i'm months late to your questions, but since you got no answers, thought I'd chime in.

     

    You've got it.

     

    If you invested $10,000 in ARLP the day it started trading, you would have purchased 646 shares ($10,000 / 15.47)

     

    To calculate how many shares you'd have today, had you reinvested every distribution you'd received, you divide your starting investment amount by the adjusted close. ($10000 / 3.08 as of today)

     

    Meaning your $10,000 initial investment would have resulted in 3,246.75 shares had you held through each split and reinvested each distribution.

     

    So, yes, your $10,000 initial investment in 1999 would now be worth $209,334.50.

     

    The split would have doubled your quantity of shares, and just about quadrupled in value over the term of the investment, so you're looking at an 800% return from holding along, the rest of the return came from the reinvestment of distributions.

     

    The only issue is that yahoo's calcuation assumes reinvestment on the ex-dividend date rather than on the dividend pay date.
    22 Oct 2012, 03:29 PM Reply Like
  • kpbarbee
    , contributor
    Comments (11) | Send Message
     
    Author’s reply » Thanks for the comments--I will go back to Yahoo and do some tinkering!
    28 Jul 2013, 05:37 AM Reply Like
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