WTH is Verizon up to?

[bworley50]

Not if you factor in the time value of money

Incorrect. You are discounting the ability for the dividends to increase, which they usually do, and the opportunity cost of capital as "cash" currently has and has had for awhile now, a negative real rate of return.

 

[dmmarck]

Incorrect. You are discounting the ability for the dividends to increase, which they usually do, and the opportunity cost of capital as "cash" currently has and has had for awhile now, a negative real rate of return.

Unless they increase at a rate that equals or exceeds the percentage of inflation in the given year of paying the fee, then no, but if they do equal or exceed that percentage you're correct.

Also, for comparison's sake the money you expended to Verizon ($30) will come back in the form of a $30 dividend, which is awesome, until you multiply that by--let's say the dividend rate this year of ~15%--and realize that you're losing, inflation and other costs aside, approximately $4.50 by wanting a dividend equivalent. Giving up $30, getting back $30 which is then reduced to $25.50, meaning that you're going to need a dividend of $35-36 to get the $30 back free and clear before other costs are considered.

But that's presuming it's treated as a dividend for tax matters, which it may or may not be depending on the earnings and profits of Verizon. It could be treated as a basis reduction (giving you more gain upon disposition of the stock you just bought) and it could also be treated as gain from sale/exchange. If you had the stock for more than a year then you're fine (same rate, at least currently and approximately, per current cap gains rates), but if you haven't had the stock for the year then you're talking about anywhere from ~35-38% currently depending on bracket, other gains, etc. The rates are going up next year (2013), but i completely forget what they are at the moment.

Once you start factoring in opportunity costs and other transaction costs many calculations go askew because we don't know the costs or the curves of the various actors. Taxes are a bit more...unforgiving .

 

[pauldroidr2d2]

No math allowed in the forum. Lol

 

[dmmarck]

No math allowed in the forum. Lol

I despise math/accounting, but unfortunately I've been sucked into having to at least be deadly with an excel sheet lol

 

[pauldroidr2d2]

I despise math/accounting, but unfortunately I've been sucked into having to at least be deadly with an excel sheet lol

LOL

 

[bworley50]

Unless they increase at a rate that equals or exceeds the percentage of inflation in the given year of paying the fee, then no, but if they do equal or exceed that percentage you're correct.

Also, for comparison's sake the money you expended to Verizon ($30) will come back in the form of a $30 dividend, which is awesome, until you multiply that by--let's say the dividend rate this year of ~15%--and realize that you're losing, inflation and other costs aside, approximately $4.50 by wanting a dividend equivalent. Giving up $30, getting back $30 which is then reduced to $25.50, meaning that you're going to need a dividend of $35-36 to get the $30 back free and clear before other costs are considered.

But that's presuming it's treated as a dividend for tax matters, which it may or may not be depending on the earnings and profits of Verizon. It could be treated as a basis reduction (giving you more gain upon disposition of the stock you just bought) and it could also be treated as gain from sale/exchange. If you had the stock for more than a year then you're fine (same rate, at least currently and approximately, per current cap gains rates), but if you haven't had the stock for the year then you're talking about anywhere from ~35-38% currently depending on bracket, other gains, etc. The rates are going up next year (2013), but i completely forget what they are at the moment.

Once you start factoring in opportunity costs and other transaction costs many calculations go askew because we don't know the costs or the curves of the various actors. Taxes are a bit more...unforgiving .

I apologize, but you're wrong. You will receive the dividend quarterly, and it will total approx $30 per year. Upgrading to a new phone when your contract expires is every two years. That's $15 per year. Also, we're only talking DIVIDENDS, not capital gains or losses, so your sale/exchange position is irrelevant. You don't know that taxes are going up next year, and if they do, on whom? Also, you keep saying adjusted for inflation. Inflation is 2%, cash earns .01%. As far as time value of money is concerned, please let me know how that $600 investment and $30 payment could be invested now that would perform better over time than a large cap, dividend paying equity. Sure, you could invest it in a penny stock which could triple or quadruple in value, but could also go to zero. Surely not left in cash in your checking account. I realize you are an intelligent person, but you're wrong on this one. Investing money in companies to whom you pay for services is usually an excellent idea, especially if they pay you back money as dividends, and most especially when that dividend pays more than 5 times what your cash earns you. Capice?

 

[dmmarck]

I'm going to bow out of this one. We can agree to disagree. If you would like more information on the tax treatment of cash distributions on stock, please reference 26 U.S.C. 301.

Sent from my Galaxy Nexus using Xparent Cyan Tapatalk 2

 

[thebignewt]

So you're going to pay like $400 more for a phone so you can "save" $30. Doesn't make a lot of sense to me.

If you "upgrade" it costs you more over 2 years than if you just buy the phone because my contract is less/month if I don't "upgrade" than if I do. Now I save another $30. You don't think they offer you an "upgrade" to save you money do you? Plus, if you don't "upgrade" you're always month to month, no ETF.

 

[pauldroidr2d2]

Since this topic has devolved into a discussion on math...

When we purchase a subsidized phone that is not being subsidized by the manufacturer, or VZW. We are subsiding it and in the end the phone costs us more than it would have had we paid for it outright.

 

[bworley50]

I'm going to bow out of this one. We can agree to disagree. If you would like more information on the tax treatment of cash distributions on stock, please reference 26 U.S.C. 301.

Sent from my Galaxy Nexus using Xparent Cyan Tapatalk 2

None needed. I'm a stock broker and well aware of the tax treatment of dividends. They're either 15% qualified or ordinary income if not tax qualified. Just remember, the $30 you shell out for the fee is after tax (ordinary income); therefore, ANY dividends that are tax qualified, which some of them are, results in a better tax treatment.

 

[Johnly]

No math allowed in the forum. Lol

ha ha, too funny. All Joking aside, stock in Verizon is a good idea...if you don't buy into the fixed dividend yields.....that is not true.....to many factors and players to equate...I can use excel, do college math, and I still have no clue....no math in the forums!

 

[thebignewt]

No, stock in Verizon isn't a good idea. Stock in Apple was a very good idea when I bought in October.

 

[Johnly]

No, stock in Verizon isn't a good idea. Stock in Apple was a very good idea when I bought in October.

I disagree, but may I clarify, a good idea for 10+ years....don't expect to get rich next year. Apple stock is sick.

 

[bworley50]

No, stock in Verizon isn't a good idea. Stock in Apple was a very good idea when I bought in October.

True Apple is a better investment for growth, but Verizon is better for income, which was the whole point of the advice. Income to pay your fees, rather than growth. Also, in the example I provided of buying $600 worth of VZ to have VZ pay your fees for you through the dividends will buy you approximately 1 share of AAPL. Owning both is optimal in my opinion.

 

[Johnly]

Incorrect. You are discounting the ability for the dividends to increase, which they usually do, and the opportunity cost of capital as "cash" currently has and has had for awhile now, a negative real rate of return.

Every time I see your avatar, I think of that Bionic you got early. lol.

I think he knows a thing or two about this...and has equated that as well. Is stock guaranteed to pay like you say? If so where do I sign, take my money.

 

[bworley50]

Every time I see your avatar, I think of that Bionic you got early. lol.

I think he knows a thing or two about this...and has equated that as well. Is stock guaranteed to pay like you say? If so where do I sign, take my money.

Ha. That was great. No, stock dividends are not guaranteed as a company could choose not to pay them at all, but due to the heavy competition in the telecommunications industry and the free cash flow that they maintain, it would be unwise not only to eliminate them but equally unwise not to increase them. That is part of the reason for raising the fees that this specific thread addresses. That is why I'm posting here. You don't just have to bend over and take it. You can invest in the company that you pay for service, thus mitigating its financial impact on you.

 

[Johnly]

I'm going to bow out of this one. We can agree to disagree. If you would like more information on the tax treatment of cash distributions on stock, please reference 26 U.S.C. 301.

Sent from my Galaxy Nexus using Xparent Cyan Tapatalk 2

heavy....I am going with the attorney on this one.
That is what I like about you dmmarck, you intelligently make your points without being rude or lude. Wish more on here were like this. I may have to read that one day.

Since the fee is so dang atrocious, we should all stop buying stock and quit feeding the machine. Oh, the fees are getting increased and new ones are being implemented, time to give them the rest and buy stock lolz! ha ha...not. I for one will not gamble to offset fees even though I think long term Verizon stock is a solid buy, as leading the LTE market will be huge in a few years...So I think, but that is a fools folly, as that may not be the case!....but I am just guessing, you are far more knowledgeable than I on this subject.

nice work.

 

[bworley50]

heavy....I am going with the attorney on this one.
That is what I like about you dmmarck, you intelligently make your points without being rude or lude. Wish more on here were like this. I may have to read that one day.

Since the fee is so dang atrocious, we should all stop buying stock and quit feeding the machine. Oh, the fees are getting increased and new ones are being implemented, time to give them the rest and buy stock lolz! ha ha...not. I for one will not gamble to offset fees even though I think long term Verizon stock is a solid buy, as leading the LTE market will be huge in a few years...So I think, but that is a fools folly, as that may not be the case!....but I am just guessing, you are far more knowledgeable than I on this subject.

nice work.

Makes no sense
http://finance.yahoo.com/echarts?s=...n;ohlcvalues=0;logscale=off;source=undefined;

 

[Johnly]

Makes no sense

"think" is the operative word....there are no guarantees.

 

[bworley50]

"think" is the operative word....there are no guarantees.

Correct, but you can sell your shares once they decide to pull the dividend. Highly unlikely. There is no guarantee that you won't be bitten by a Bull shark and struck by lightning simultaneously while swimming in the Gulf of Mexico, but you might do it anyway.