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Dividend Reinvestment
Hi,
I'd appreciate some assistance with understanding how dividend reinvestment affects total cost.
Example
If I purchased 1000 ABC shares at $10.00 each with a brokerage fee of $100 - my total cost would be $10,100.
Let's say I received a dividend of 20c per share (ignore tax to keep it simple) and received a payment of $200.00
Assume the ABC share price is still $10.00 per share and I purchased 20 more ABC shares with the $200 from my dividend, thereby increasing my ABC holding to 1020. Let's say the brokerage fee was $20.00.
Does this mean that my new total cost for ABC is calculated as $10,100 (Initial Purchase) - $200 (Div) + $20 (Brokerage) = $9,920 and therefore my average share price for ABC is $9,920/1020 = $9.725?
Many thanks
Mickey
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