When you receive a statement of your investment in a stock, you might see a fractional share listed as well as whole shares. This is very common if you participate in a dividend reinvestment plan, or DRIP, offered by a company. If a company pays regular dividends, over time the value of fractional shares can add up to hundreds of dollars when you sell the shares.
A company also reduces the amount of money it pays out when shareholders elect to reinvest dividends instead of taking cash.
When you participate in a DRIP, the shares you buy are credited to your account. Often, companies make this a better deal by making DRIP participation free so you acquire more shares without paying any commissions or fees. The company credits your account with a 0. At the next dividend date, if the same thing happens you will be credited with another 0.
The fractional shares are added together, so you end up with another whole share and a 0. When you sell all of the shares you own of a stock, you are paid the market price for each whole share plus a proportional amount for any fractional share. Several types of stock transactions can generate fractional shares besides dividend reinvestment.
A stock split may result in your account being credited with a fractional share. Some online brokers even offer the option of buying fractional shares. Based in Atlanta, Georgia, W D Adkins has been writing professionally since He writes about business, personal finance and careers.
Adkins holds master's degrees in history and sociology from Georgia State University. He became a member of the Society of Professional Journalists in Each week, Zack's e-newsletter will address topics such as retirement, savings, loans, mortgages, tax and investment strategies, and more. At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors.
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Visit performance for information about the performance numbers displayed above. Skip to main content. What Happens to Partial Shares From Reinvested Dividends When You Sell?
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Do ETFs Pay Dividends in Cash or New Shares? How to Buy Overseas Shares Definition of Fractional Stocks. Selling Fractional Shares When you sell all of the shares you own of a stock, you are paid the market price for each whole share plus a proportional amount for any fractional share.
Other Partial Share Causes Several types of stock transactions can generate fractional shares besides dividend reinvestment. References 3 Securities and Exchange Commission: Direct Investment Plans CostBasis. Cash in Lieu Free Dictionary: Photo Credits bank statement image by torben from Fotolia. About the Author Based in Atlanta, Georgia, W D Adkins has been writing professionally since Recommended Articles Dividends Vs.
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The benefits of fractional shares for investors
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