Back in the 1980s, from what I understand, Ronald Regan made it beneficial for investors to set up gift trusts for their children. Apparently my father took advantage of this tax loophole and bought some PG&E stock.
Sometime in 2001, right before or shortly after PG&E had declared bankruptcy, he transferred that PG&E stock to me and I found out I would have to pay taxes on the dividends it had put out that year despite not having had the benefits of those dividends. For Christmas that year I demanded at the very least the money to pay the taxes, because we didn’t have the money to pay them (note: today that probably wouldn’t be an issue because we would have been in the 0% tax bracket for dividends, but taxes were different back then), and he handed over one of the final dividend checks. PG&E would not spit out another dividend until 2005, at which point I was no longer on a graduate student salary.
Maybe I should have sold the stock the minute it was transferred, but it had lost so much value and I didn’t really know how to go about selling, that other than dealing with that year’s taxes, I pretty much just pretended that I’d never gotten the stock.
When it started throwing dividends again, it was a lovely surprise. I have two types of stock: regular stock and preferred stock. I set up the preferred stock to drip into the regular stock and then the regular stock would deposit a few hundred dollars into my savings account every quarter. By the end it had gotten up to around $800/quarter which was a nice treat. I used to do mental calculations about how much we’d need to have invested in order for the quarterly dividends to pay all of our monthly expenses.
And then PG&E discovered it might be found liable for California wildfire damages and all dividends stopped. Thankfully we don’t need the quarterly returns, and if I’m not going to be paying taxes to an administration, this is a good one to not be paying taxes to. But imagine if I were fixed income and this were a large part of my portfolio? Diversification of income streams is so important!
I’m not getting rid of this stock… all the online things say it’s a bargain right now for people who are willing to be patient. And it never really felt like my money to begin with. But we’re definitely keeping all our own invested money in broad-based low-cost index funds.
Do you own any single stocks, or are you sticking to index funds like a smart person?