An abridged Stocktwits conversation

It began innocently enough, somebody posted on Stocktwits;

So, then I asked;

Do you #DRIP $OXLC and better yet do you DRIP at a DISCOUNT? Who is your broker?

And this reply came back;

Who are you calling a drip? 😉 No, I don’t DRIP because much of what I’ve always done is day trade. So although I might hold some of these nice div stocks, I don’t usually hold them for long, but in these few accounts I almost always get back in for the divvy party. Honestly, I haven’t really looked too much into doing it because I don’t necessarily use the div for the same stock. Like now I’m looking for a new car (I knew I should have bought TSLA at 200 not long ago), want to get one of those small SUV’s, so who knows where these divs go (I’ll know a few minutes after they’re in my accounts). I am stuck with TD, a hold over from Scott (I wish they could come back). I’ve opened something with Fidelity but was so turned off by my initial contact with them that I doubt they’ll get much from me. Still not sure where I’ll end up. Maybe I’ll start my own platform and drag everyone here to it HAHA.

Let’s follow along, shall we? I posted my boilerplate info-message about discount #DRIP plans;

No drip, eh? Shame, you’re throwing away an extra 5% every month. $CLM $CRF $GOF $OXLC $UTG @Chase @Fidelity @MerrillEdge @CharlesSchwab @TDAmeritrade @etrade Why you should #DRIP *and* why you should DRIP at a broker that participates in the #DTC discount plan; stocktwits.com/togo24help/m… and stocktwits.com/PennyWeasal/… and stocktwits.com/PennyWeasal/… and stocktwits.com/FundamentalV… but Google won’t help you with that. Did you read those threads? Well, did you read that blurb on my spreadsheet (‘Div’ tab)? docs.google.com/spreadsheet… Also read this; hyhrd.com/2018/05/13/hyhrd-…. Know this; The #DTC discount plan is a #SECRET! You *HAVE TO CALL*! The information is *NOT* available *anywhere on the internet* except those links I have already given to you. *I* and *others* have taken many hours to amass that info.

Then my friend “Buck” joined the fray;  

Yeppers… I mean, with the 5% DRIP discount, when I got my last DRIP shares and sold them the same day they dropped into my account, I ended up with an additional 11+% in cash vs taking straight cash as the distribution. Sure, I had to wait a few extra days (a whole 3-days), but +11% is, well… +11%! That means, I can buy +11% more in other shit! It really is a no brainer!

And, he brought “show-and-tell”;

Then the conversation goes back and forth a bit;

CEF’s provide for a 5% discounted DRIP if you take shares vs taking cash. It’s documented in their prospectus. @panda317 has an extensive list of CEFs that have a discount program. Just because they have a discount DRIP program doesn’t mean they automatically give you a discount. In $OXLCS case, two conditions have to be met (has been for the last 13-months and expected to continue. 1) $OXLC has to be selling NEW shares [typically to buy more CLO assets] 2) the calculated discount price [95% of month-end close] has to be greater than their current “official” NAV. At $6.81, that works out to at least a month-end close of $7.18. Since $OXLC is trading at a 35-40%, as long as they’re selling NEW shares – the 5% discount is a given.

…and as long as Oxford is selling NEW shares and $OXLC is trading at a premium to NAV by at least 5%, DRIP’d shares will have the 5% discount applied.

And then he pressed on by asking;

I’m asking about this because I’m trying to see the benefits of this automatic purchase. You mention a 5% discount. I don’t see where the company is giving a purchase discount of any percentage. I also don’t see which days price it pays (I’m assuming it’s the price of the div pay day, although maybe it’s the record date). The info on the site makes a big deal of commission free DRIP but that is meaningless now. From a previous comment of yours it seems you think I’m being argumentative but in truth I’m really trying to see the benefit of DRIP as opposed to me buying it myself (if I want it). Forced buying like forced savings? I’d appreciate getting to understand this because if I actually get the percentage gain available only through the DRIP (and not my own purchase and sale), I would pocket numerous thousands per year. Help me understand please. Thanks for wasting your time with this neophyte.

So, ‘Buck’ continued…

Most CEF’s provide for a 5% discounted DRIP if you take shares vs taking cash. It’s documented in their prospectus. @panda317 has an extensive list of CEFs that have a discount program. Just because they have a discount DRIP program doesn’t mean they automatically give you a discount. In $OXLCS case, two conditions have to be met (has been for the last 13-months and expected to continue. 1) $OXLC has to be selling NEW shares [typically to buy more CLO assets] 2) the calculated discount price [95% of month-end close] has to be greater than their current “official” NAV. At $6.81, that works out to at least a month-end close of $7.18. Since $OXLC is trading at a 35-40%, as long as they’re selling NEW shares – the 5% discount is a given.

“Buck’ should have been a teacher;

Example: You bought 5,000 shares at $X.XX /sh before ex-div. On ex-div date, you are entitled to receive $675.00 [cash] in distributions. IF, when they pay the distribution and you’re taking cash – you get $675.00. Yippee. Instead, you elect to take it as DRIP. Last month, $OXLC closed month-end at $8.92. Take $8.92 times 95% and the calculated DRIP price was $8.474 /sh. Now, take the cash value of your distribution ($675.00) and divide it by $8.474… works out to 79.655 shares. Now price those shares against the open market. 79.655 x $9.40 [the mid-point from the last line of my spread sheet] = $748.76! $73.76 more or 10.92%!

So, finally dawn breaks over Marblehead!

Now I think I see. That discount information is missing from the explanation on my site. Let’s see if I’m able to follow. So I think the NAV for OXSQ is $5.42. It closed 1/31 at 5.95, at 95% is 5.65. My distribution in this account for this month will be aprox 2177. That’s 385.4 shares at 5.65. As of today’s close the price is 6.09, x 385.4= $2347. So, assuming I can get the discount mentioned (and I did the math right…used the right numbers, NAV and closing info), I’d pocket an extra $170. Not bad for doing nothing. I see your point. I also see the partial shares is a positive. So, how’d I do?

Pretty good, except $OXSQ doesn’t currently offer a discount #DRIP…

Let’s wrap this up, shall we? Penny has the floor…

Your math is right. 1) assuming they’re selling NEW shares… 5% discount DRIP should be offered. That said.. since it sounds like you haven’t DRIP’d before, I’m going to assume you’re going into your account and select the DRIP option. If true.. What financial institution is your account with? Some, like Fidelity, when you select the DRIP option, you’re automatically set up on their (Oxford’s) DRIP plan. If you’re with E*Trade – you’re basically fucked! Some of the institutions you have to call and speak to a back office licensed agent to get set up correctly. Could take 3-4 calls. Never deal with the front line person – clueless. Always a back office licensed agent. I believe Chase, TDAmeritrade, Fidelity [for sure] and Schwab are automatic for any tickers that have a discount plan. If you don’t get set up correctly, your DRIP will be at your financial institutions calculated price (e.g. market). Good luck.