Q. TSP explains in its brochure that dividends are already incorporated into the share price. This seems illogical to me, as I believe the definition of a dividend is a cash payout of a certain stock share price at a certain time of the year. Does the Thrift Savings Plan definition mean that the share price of the S, C or I Fund is artificially inflated?
A. No, it means the dividends that are paid by the stocks owned by the funds are retained by the fund and increase the net asset value of the fund. The share price reflects this net asset value.
2 Comments
OPM should revise and upgrade their phone system. I retired at the end of 2011 and for months I have been trying to get answers to some questions I have over the phone, the number they provided for all retirees always sounds busy when I call any time of the day, only on weekends and evenings it rings, but of course there is no one to answer a call at those hours. Until now I have been unable to connect, not even call-waiting where I could leave a message and they would call me back. Please make improvements to that old-fashioned system.
If you own a retail mutual fund, you are given an option for (A) a cash payment of dividends or (B) you can choose to have those dividends automatically reinvested into said mutual fund. The TSP uses the (B) second option and automatically reinvests your dividends into your TSP funds which is reflected as an increase of share price.