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Author: Flyboy007 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 3843  
Subject: Groupon Inc Date: 8/10/2012 11:26 AM
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Does any know if its a good time to get out of this stock 
I've heared of it on Bloomberg saying it's paying 5% dividen
But it's been dropping like a rock seince I've bought it.
Up now .5% at $7.00
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Author: jdc115 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3556 of 3843
Subject: Re: Groupon Inc Date: 8/10/2012 11:54 AM
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I don't know anything about them to say if it is a good time to get out. As far as the dividend goes, I think it is more accurate to calculate the dividend yield based on the price you bought it at, not the current yield at the current price.

If it is $7 now paying a 5% yield and you bought it at 14, then I would think your yield of more properly reflected at 2.5%

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Author: RHinCT Big red star, 1000 posts Ticker Guide SC1 Red Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3557 of 3843
Subject: Re: Groupon Inc Date: 8/10/2012 2:46 PM
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I have heard a lot of skepticism about Groupon (NASDAQ:GRPN), but I know almost nothing about them. I took a brief look at two sources. Both say that Groupon does NOT pay a dividend!

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Author: rthedges Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3563 of 3843
Subject: Re: Groupon Inc Date: 8/21/2012 1:33 AM
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Respectfully disagree with that perspective of dividend assessment ... That's like driving a car with the perspective of only the rear view mirror and not the front windshield ... Reality is what it is, and if the stock has dropped in value, then dividend assessment is based on current value, because if the stock is sold and another purchased, one would have the same current amount to invest and assess ... Apples to apples you know ...

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Author: jdc115 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3565 of 3843
Subject: Re: Groupon Inc Date: 8/21/2012 2:40 AM
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Respectfully disagree with that perspective of dividend assessment ... That's like driving a car with the perspective of only the rear view mirror and not the front windshield ... Reality is what it is, and if the stock has dropped in value, then dividend assessment is based on current value, because if the stock is sold and another purchased, one would have the same current amount to invest and assess

I look at it a bit different. If out in $1000 into a stock with a 5% yield, I would be getting $50 payout. If the company continues to pay the same amount but the stock price drops in half, the yield will go to 10% but I am still pulling the same $50 from my initial $1000 investment.



In other word, it is the yield on cost vs current yield is more realistic to view your dividend return


"Dividend yield is a way to measure how much cash flow you are getting for each dollar invested in an equity position - in other words, how much "bang for your buck" you are getting from dividends.

Read more: http://www.investopedia.com/terms/d/dividendyield.asp#ixzz24...

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Author: RHinCT Big red star, 1000 posts Ticker Guide SC1 Red Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3566 of 3843
Subject: Re: Groupon Inc Date: 8/21/2012 8:41 AM
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If out in $1000 into a stock with a 5% yield, I would be getting $50 payout. If the company continues to pay the same amount but the stock price drops in half, the yield will go to 10% but I am still pulling the same $50 from my initial $1000 investment.

I'm not sure you have given enough consideration to the "if not" cases.

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Author: jdc115 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3567 of 3843
Subject: Re: Groupon Inc Date: 8/21/2012 9:08 PM
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I'm not sure you have given enough consideration to the "if not" cases.

For sure then my yield will change, if not can go both ways.

To use an example, I have held BIP for a few years. When I bought them around 15.50, they were paying out 27.5 per share I believe. Now they pay out 37.5 per share and they price is up 135%. Due to the price increase, the actual current yield is down but the payout on my original investment is up quite a bit.

Should I use the current yield which would give me a 4.3% dividend or look at what the yield is on my original purchase amount and the current payout which would be around 10.5% now?

Out of laziness, I just look at the 4.3% is the other method takes time for me to calculate as well as look up historical data. But wouldn't the later be a fair representation of my yield?

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Author: jdc115 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3568 of 3843
Subject: Re: Groupon Inc Date: 8/21/2012 9:22 PM
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I could very well use a negative example like SVU, as the price declined the yield went higher (until they suspended it). But my thinking isn't that I should use the higher yield as my original investment amount was returning lower based on the payout during that time.

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Author: zse4rf One star, 50 posts Old School Fool Global Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3569 of 3843
Subject: Re: Groupon Inc Date: 8/21/2012 10:23 PM
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In my opinion, one should always use the current yield, by which you can compare your current investment, today, with what you could get from a competing investment, today. The past is over and done with.

That said, it is often gratifying to see what a good yield you got by buying and holding on to that past investment

Paul

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Author: jdc115 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3570 of 3843
Subject: Re: Groupon Inc Date: 8/21/2012 11:25 PM
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I am open that I might be wrong, but I thought the general opinion is that the Cost basis yield is a more accurate measurement of your investment.

Certainly current yield is far easier to determine. In practice, I don't track my cost basis yield as it really would take too much time. But in my mind, if I have a dividend stock drop but the payout remain the same, I am not thinking about the great yield I am now getting unless I were to invest additional funds at the lower price.

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Author: RHinCT Big red star, 1000 posts Ticker Guide SC1 Red Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3571 of 3843
Subject: Re: Groupon Inc Date: 8/21/2012 11:29 PM
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...as the price declined the yield went higher (until they suspended it)...

That is not aa uncommon a scenario as all that. A business doing badly enough to drop sharply may well not be able to sustain the dividend. One that maintains the dividend might have an unsustainable, even negative, payout ratio.

As for calculating the dividend yield, I think it makes the most sense to look at it both ways, each in its own way.

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Author: Packers101 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3577 of 3843
Subject: Re: Groupon Inc Date: 9/1/2012 10:40 PM
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The dividend yield, in my opinion is pegged to what the payout, be it current or past going back as far as YOUR purchase date, is. To put it another way, if YOU paid $10 for a stock and that stock was paying a $1 annual dividend at the time of YOUR purchase, the you would be receiving a 10% payout.

If the stock were to rise to $15 or drop to $5, the dividend yield changes only for new purchases. YOU still have a cost basis of $10, so any payouts will be based on your $10 per share cost. That is YOUR personal rate. If the company raises its payout to $2, you would now be receiving $2 on a $1 investment, and YOUR rate would then climb to 20%. But this is based on a change in the payout amount, not a change in the stock price.

The rate you receive will always be based on the annual dividend amount and the price you paid for the stock.

Rises and falls in the stock price create unrealized (unless and until you sell) gains or losses, not changes in dividend rates once you have bought the stock. If you sell, those gains or losses go from unrealized to realized.

I hope this helps -

Paul

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Author: Packers101 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3578 of 3843
Subject: Re: Groupon Inc Date: 9/1/2012 10:43 PM
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Sorry - I just spotted a typo -

If the stock were to rise to $15 or drop to $5, the dividend yield changes only for new purchases. YOU still have a cost basis of $10, so any payouts will be based on your $10 per share cost. That is YOUR personal rate. If the company raises its payout to $2, you would now be receiving $2 on a $1 investment, and YOUR rate would then climb to 20%. But this is based on a change in the payout amount, not a change in the stock price.


This should really say

If the company raises its payout to $2, you would now be receiving $2 on a $10 investment, and YOUR rate would then climb to 20%.

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Author: RHinCT Big red star, 1000 posts Ticker Guide SC1 Red Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3579 of 3843
Subject: Re: Groupon Inc Date: 9/2/2012 8:28 AM
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The problem I see with only looking at the dividend in relation to the cost basis occurs when the dividend stagnates while the stock price rises. If the dividend was 4% when you bought it, and the stock rises by 75% while the dividend remains unchanged, you are only receiving 2.29% on the current value. If the dividend is important to you then you might do better to sell that stock, realizing the gain in value, and invest the proceeds (75% larger than when you started) in another stock with a better current return.

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Author: Packers101 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3580 of 3843
Subject: Re: Groupon Inc Date: 9/2/2012 12:16 PM
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The hitch there is twofold, but your idea works under a 3rd set of conditions.

First, the return you are getting, based on the investment you initially made, will continually give you a yield of that percent. If the dividend rises, then your yield goes up with the rise. If the stock price rises, your yield remains unchanged. Conversely, if the stock price drops, your yield stil remains unchanged.

Second, if you are in search of a higher dollar return, which, I believe, would be the primary reason to get out of the initial investment, (the other reason being that the initial investment stock is no longer looking like a going concern), and you sell the initial purchase at a substantial gain, you will incur the dreaded capital gains tax, which will reduce your overall profit by whatever percentage the tax happens to be at the time of sale.

Third - That being said, if you were making 10% on a $5 stock (let's assume 100 shares for the sake of easy math), then you were pulling in $50 annually. If the stock moves to $8 and you reinvest the money in an $8 stock paying 8%, you're now pulling in $64 annually. But you still have to pay that cap gains tax on the sale as well.

So, it may come down to higher rate of return vs. higher amount of return.

Paul

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Author: RHinCT Big red star, 1000 posts Ticker Guide SC1 Red Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3581 of 3843
Subject: Re: Groupon Inc Date: 9/2/2012 5:36 PM
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Capital gains tax certainly has to enter into the calculation. Of course if the money is in an IRA or similar account that isn't a factor.

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Author: whyaduck1128 Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3583 of 3843
Subject: Re: Groupon Inc Date: 9/12/2012 1:54 PM
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"you will incur the dreaded capital gains tax"

I don't dread the capital gains tax at all. If I incur a tax on capital gains, it means I HAD capital gains. That means I must have done something right or got lucky, and I don't care which of those it is.

Sometimes it is better to take the gain and pay the tax instead of holding on to paper gains that may vanish in a heartbeat. Sometimes.

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