Based on past posts, there seems to be quiet a few USAA members on this board. I’ve discovered something interesting in my SEP account.
For dividend paying stocks, USAA rounds to 3 digits when calculating fractional re-invested dividends.
For instance, on 08/16/2012 AAPL paid a $79.50 dividend on 30 shares ($2.65/share). USAA then purchased .125 new fractional shares at the then current price of $631.65. When multiplied out, (631.65 X .125) equals $78.96 (rounded).
There was a 0.54 cent ’rounding’ error in USAA’s calculation because they are rounding the DRIP fractional shares by 3 digits instead of 4. If they had calculated out to 4 digits, the fractional shares purchased should have been .1259 not .125. So they are essentially truncating at 3 digits and not bothering to round up (IMO this should have rounded up to .126 shares).
In 15 months I found 63 out of 64 DRIP transactions that, after the dividend was deposited into the account, the value of the fractional shares purchased were short anywhere from .01 to .54 cents when compared to the original dividend paid. The higher the stock price (AAPL), the more significant the potential shortage.
Over 15 months, I’ve been shorted $1.20. Not much but when you multiply this out by USAA’s 9.8 million customers, it’s potentially A LOT of money. (Think Office Space).
I probably could have simplified this post, but I urge you all to check your statements if you are DRIPPING dividend stocks at USAA. Look at the statements, the math does not add up.
I’ve contacted USAA management and they are AWARE of this situation and have indicated in writing that they are DONATING the “differential” to a charity of THEIR choice (currently the United Way).
I don’t understand why they don’t sweep the ‘differential’ amount into my money market account or round to 4 digits for more accurate calculations.
The fact that they are arbitrarily donating my money to charity is not disclosed in any of the disclosure or custodial agreements I signed (I couldn’t locate it).
My first thought was that it was maybe a corporate dividend reinvestment plan, but I checked and AAPL doesn’t have one. So at least in the case of your Apple stock, it is USAA’s plan. (There are some corporate plans that allow you to reinvest directly, sometimes at a discount to closing price on the payment date.) Keep in mind, that dividend reinvestment is probably your choice, you don’t have to reinvest. Essentially, what you’re doing is buying fractional shares of stock, presumably without paying a commission. So you’ve paid $1.20 for 64 stock transactions. That’s pretty cheap.
That is pretty cheap, and I can opt out (I have). These were all USAA administered DRIP transactions.
To clarify, many of the transactions were off by 1/2 of a cent or less, but several were off by .02, .03, .05, .14, and up to .54 (among several accounts). It adds up over time and I would not consider these to be large accounts.
But the Customer Account Agreement clearly says, “No commissions will be charged for these transactions.” Additionally, there is no mention that any excess dividend that is not converted into fractional shares will be diverted to a charity of their choice.
If you don’t manually calculate these things, you’d never know it was happening. The statements show incorrect calculations (i.e. Quantity 0.125 X Price $631.65 = Amount $79.50). This does not compute. This would never fly on a credit card statement or corporate financial statements.
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