### Dividends and Stock Dividends

Dividends
Dividends are treated as returns on equity. This means the markets adjust for dividend distribution. Furthermore, in order to maintain your preferred trailing stop percentage, the entry price and historical high prices must also be adjusted for the same reason.

In TradeStops, we employ the use of an adjustment multiplier. Dividend multipliers are calculated based on the dividend as a percentage of the price, primarily to avoid negative historical pricing (which would occur eventually if the amount of each dividend was simply subtracted from the entry price over time).

Stock Dividends
A stock dividend is a dividend payment made in the form of additional shares, rather than a cash payout.

TradeStops will adjust prices by stock dividends (the same as we do for splits). If you enter a position which you have purchased in the past and there were any stock dividends since the purchase, then following formula will be applied:

So… how are my Trailing Stop impacted?
Let’s take example of NLY, Annaly Capital Management, as an example.

The value of the high closing price is absolutely critical to where your trailing stop loss is. If you’re using a 25% trailing stop, for example, on NLY and you bought NLY in December 2013, you will have a very different stop loss point if you use unadjusted historical prices than you will if you use adjusted historical prices.

If your stop loss is 25% below the unadjusted high of \$11.92, then your stop is at \$8.94.

On the other hand, if you’re using adjusted prices for calculating your stop loss points, then your 25% trailing stop is calculated from the adjusted high of \$10.06. Your stop is at \$7.55.

#### Splits

Splits occur on stocks if the company wishes to lower the cost per share to make the stock more attractive to investors. When this happens, the number of shares increases, but the price per share is reduced. Reverse splits can also occur to increase the price per share.

So…how are my positions impacted?
TradeStops will adjust Entry Price / Shares accordingly in TradeStops for all positions (both manual and synched). The behavior will depend on what data is returned from our data provider (whether the portfolio is updated before or after brokerage has handled the split).

For manual positions, you have two choices. If you know the adjusted entry price and share number, enter that information, and select “Already adjusted by splits, stock dividends, and spinoffs.” If you do not know the adjusted information, enter the pre-split information, and select “Please adjust by splits, stock dividends, and spinoffs.”

#### SpinOffs

A spinoff is the creation of an independent company through the sale or distribution of new shares of an existing business or division of a parent company.

TradeStops will also adjust your Cost Basis by the spinoff and add a manual position for the spinoff company automatically with a weighted Entry Price. Your gains calculations will correctly reflect the spinoff adjustment.