Loyal3 Dividends

One of the more popular google search terms that have led readers to my site lately has been loyal3 dividends. I’m guessing people are asking what happens to dividends you receive from stocks you hold in your Loyal3 account. This isn’t made very clear on Loyal3’s website and it was something that I too wondered about until I received my first dividend recently.

Dividends received are collected in your cash account, which is the “Available Funds” portion on your account overview page. They are not automatically reinvested but with the $10 minimum purchase you could easily set an order to pick up some more fractional shares if your dividends total at least $10.

When you go to make a new purchase using your credit/debit card Loyal3 will automatically use the cash collected in your account from dividends first and then charge the rest from your card. For example if you have $5 in dividends in your cash account and you put in a order using your credit card for $100 of McDonald’s stock, the cash will be applied to the order and you will be charged $95 on your card.

You can also transfer funds out of your “Available Funds” to your checking account if you have it linked to your Loyal3 account if you want to spend your dividends or put them into a different account. You can also use this option to add money to your “Available Funds” if you don’t want to use your credit card. Personally I prefer to use a credit card so I can get cash back rewards for all of my purchases. With no commissions or fees to buy stock through Loyal3, it’s like getting paid to buy stocks. Awesome deal, right? 😉

Hope this helps!

Disclosure: I am long McDonald’s.


  1. Hey Mr. SFZ. I wanted to provide a bit more information to your readers about Loyal3. I’ve been using Loyal3 for a little bit. I have some Apple shares in there, as well as very small amounts of several other companies. I wanted to get my Apple shares into my regular brokerage account before the stock split/dividend for consolidation purposes (as I’m definitely not going to be buying any more for a bit after this latest round of growth). But, I’d like to leave the other ones as I’ll continue buying small amounts.

    A small but possibly important feature just cropped up for me: you cannot only transfer shares from 1 company, you must transfer ALL of your shares for ALL of your companies (of course, minus any fractional shares). Furthermore, your account will be permanently deleted from Loyal3.

    Here is the relevant text from an email from someone at that company:

    “Once the shares are transferred your account will be permanently closed, you will not be able to open a new account.”

    There is probably a bit of a workaround, but since the IRS is potentially involved, I’d be hesitant to try and find a back door that might be construed as tax evasion. Perhaps this is clear to others from the website/FAQ, but I wasn’t fully aware of the extent of this limitation.

    1. I didn’t know about this policy regarding transferring shares. I too planned on transferring shares into my regular brokerage account after accumulating a certain amount just to consolidate and have the option to automatically reinvest dividends, especially my Coca-Cola shares.

      Thanks for sharing this info Darren.

      Best wishes,

      1. No problem, thank you for hosting such a nice blog. It’s a bit of an annoying extra complication, as now we’ll have to decide when we’ve had enough no-commission stock forever (at least, I suppose, until the next company comes along with a similar business model. Thinking about it a bit more, I feel like Loyal3 must be making an incredible amount of money if there are a good number of people using it (I don’t know if there are). They basically can set their own bid/ask spread. If that spread is a bit smaller than the intraday trading variance over a couple days for a company, we couldn’t tell the difference. For example, they could buy the stock for $30, say, and suppose over a two day window that stock went between $29 and $31. Then they could say they bought it at anything between 30 and 30+ alpha,
        where alpha is between 0 and 1. They could calibrate this alpha to trade off arbitrage for investor suspicion. If you add in the amount the company itself supposedly pays them, that seems quite lucrative. I’m not saying they are definitely doing this (and I’ll continue to use the site to some degree) but it wouldn’t surprise me a bit.

        On a completely different note, I’ve been wondering recently about investing in taxable vs. tax-advantaged accounts. I’m not quite sure what the best strategy would be, given that we are all probably attempting to retire well short of 59.5 years. If you’re feeling up to it, I’d like to hear your opinion on the matter.

        1. Darren,

          While its definitely possible that they are skimming extra from the share price like you mentioned, I still think the pros to their service outweigh the cons, especially for someone like myself, with limited capital to invest each month.

          Regarding the topic of taxable vs. tax advantaged, I actually have a blog post draft where I talk about my strategy, just haven’t had the time to finish it recently. I personally think a Roth is a great tool to be used for those pursuing early retirement. Since you can withdraw contributions at any time without penalty/taxes I personally use it and plan on maxing mine out each year. If you wanted to get a little more complicated, you could certainly invest in 401k’s and traditional IRA’s to get the tax benefit today and then convert to a Roth during early retirement when you’re taxable income is likely to be lower. Mad Fientist did a great article on this recently. Here’s the link


          The only issue with the strategy he presents would be that converting a traditional to a Roth would require you to sell your stocks in order to move the cash from one account to the next. As far as I know, there’s no way to convert from a traditional to roth and keep your stock shares which is an important thing for us dividend growth investors. We don’t like to sell shares, especially after holding them a while and building up a high yield on cost. If you invest in index funds (or any mutual fund for that matter) on the other hand, this may not be a problem for you since you can just sell your funds, pay the taxes, and then buy shares back once you’ve put the money in a Roth.

          In addition to my Roth, I also invest a small amount of money each month in the Thrift Savings Plan (401k for federal employees) using pre-tax dollars in index funds. I plan on converting this to traditional IRA once I leave my current job and then maybe to a Roth like the Mad Fientist post. I invest this money with a total return view, knowing I’ll probably not use it until a normal retirement age.

          That being said, for us early retirement seekers we’re still going to have to have a considerable amount of funds in taxable accounts due to the restrictive annual contribution limits of tax advantaged accounts. But I think you might as well take advantage of them if you can, especially a Roth.

Leave a Reply