Economics 101

I own stock.  I own shares in several companies actually.  I have 7 shares in Wendy's, 7 shares in Tim Horton, and a lot more than that in Caterpillar.  However, I don't play the stock market and I didn't even buy those stocks for myself.  They were all gifts.  That's how my family rolls.

A couple of years ago I thought it would be a good idea to combine my assets by selling my Wendy's and Tim Horton stock and putting the money towards more Caterpillar stock.  This unfortunately is very difficult.  I would have to transfer the stock to another broker who could then make the exchange.  Way too much of a hassle for a common layperson like myself.

The point of this story is to look at the stock dividend situation.  As far as I can understand, stock dividends are a percentage of your stock that makes profit.  With Caterpillar and Tim Horton, I have it set up so that my dividends are automatically reinvested into more stock.  With Wendy's however, I get quarterly checks in the mail.

Sounds great right?  No.  With only 7 shares each, these dividends are approximately $0.14-$0.16 each.   I called Wendy's the other day and they do not have dividend reinvestment options.  That means I can't sell the stock and I can't reinvest the dividends.  I am stuck with quarterly checks so small that I have to go to the bank to cash them because the ATM won't accept them.

Realizing all this, I decided to do a quick study on cash-in/cash-out for amusement purposes.  Here goes:
Approximate dividend check - assume $0.15 every three months = $0.60 per year
Current cost of a tall vanilla mocha = $4.00
Cost of vanilla mocha 2-3 years ago = $3.82
Assume future cost of vanilla mocha at $4.20
$4.20 / $0.60 = 7
That means that with my dividend checks I can get one tall vanilla mocha in 7 years.

Now, let's look at the cost associated with these dividend checks:
Distance from my office to nearest BECU branch = 2.0 miles
At 30 miles per gallon, that equals 0.07 gallons of gas
Assuming $4.00 per gallon of gas, that comes out to $0.26 or approximately $0.50 round trip per dividend check.

The checks are good for six months so let's say I combine trips and only go twice a year.  That means a $1.00 per year cost for a $0.60 return.  Are you following me?

Therefore, it doesn't actually matter that I can get a coffee every seven years because it's costing me more money to cash the checks then they're even worth.

One might ask at this point, why bother?  Because if I didn't cash the checks, they would win.  I'm not entirely sure who "they" are, but I'm not giving them a tall vanilla mocha every seven years.