I found Robinhood's Biggest Flaw - The Dividend Yield Error

TL;DR

Robin Hood's reported dividend yields are significantly lower than the actual yields, raising questions about how the platform makes money.

Transcript

so I've been a Robin Hood dividend investor for a long time now this is my portfolio on the side and right now it's paying me $500 every single month and just the other day I was about to buy some more stocks and then I figured out something pretty terrible with Robin Hood and I'm surprised that it took me this long to see but look at how wrong the... Read More

Key Insights

• 😘 Robin Hood's reported dividend yields are often significantly lower than the actual yields, raising concerns about the platform's accuracy.
• ❓ The discrepancies in reported yields may be due to a cosmetic issue rather than intentional underpayment by Robin Hood.
• ✖️ Investors should independently calculate the actual dividend yield of stocks by multiplying the stock price with the known dividend yield and adjusting for frequency of dividend payments.
• 🆘 Other resources, such as dividend websites and automated spreadsheets, can also help investors accurately analyze dividend stocks.

Questions & Answers

Q: How did the speaker discover the inaccuracies in Robin Hood's reported dividend yields?

The speaker noticed the discrepancies when trying to buy more stocks and realized that the reported yields were significantly lower than what they should be. This prompted further investigation into the accuracy of the reported yields.

Q: Does Robin Hood intentionally underpay dividend investors?

No, Robin Hood does not have control over the actual dividends paid out. The reported yields are cosmetic and do not affect the amount paid to investors. The platform's revenue comes from other sources, such as order flow.

Q: How can investors calculate the actual dividend yield of a stock?

There are three methods suggested in the video:

1. Multiply the stock price by the dividend yield (obtained from a reliable source) to get the annual dividend amount. Then, divide this amount by the frequency of dividend payments to determine the payment per period.
2. Use websites like Dividend.com to look up the dividend yield, payment frequency, and other relevant information.
3. Use automated spreadsheets, like the one provided in the video, to calculate the dividend yield and payment frequency.

Q: What should investors do when analyzing dividend stocks on Robin Hood?

It is advised not to rely solely on Robin Hood's reported dividend yields when considering dividend stocks. Investors should use reliable sources, such as the methods mentioned above, to calculate the actual dividend yield and make informed decisions.

Summary & Key Takeaways

• The speaker, a long-time Robin Hood dividend investor, discovered that the reported dividend yields on the platform were incorrect for multiple stocks in his portfolio.

• Examples of the inaccuracies include Ad V with a reported yield of 4.28% (actual yield is 6.72%) and Emerson Electric with a reported yield of 2.53% (actual yield is 3.43%).

• The speaker questions if Robin Hood intentionally underpays dividend investors, but it is clarified that the reported yields are a cosmetic issue and do not affect the actual dividends paid out.