Q: I have a SWPPX fund that pays annual dividend (reinvested). When it is paid out the fund readjusts and lowers the share price so that the overall fund value stays the same. What have I gained from the dividend “payout”?
A: You are right you really haven’t gained anything. The fund is paying out capital gains for the year which you have chosen to reinvest back into the fund. One thing you did do is bring up you cost basis. If this is in a non-IRA account you will owe taxes on this transaction; however, if it is in a retirement account no taxes are owed.