Given I am an Index Investor, Dividend Reinvestment isn’t really a big thing for me any more, but at the time, it did play nicely for me. Whether you should invest in companies that pay dividends (and maybe should put that money into building the company) is an argument for other folks.
DRIP : Dividend Re-Investment Programs
Early on in my investing career I got around to phoning up my stock brokers and asked to join the DRIP for every common stock that I owned and it has finally paid off!
What’s a DRIP?
DRIP is a Dividend Reinvestment Program, which most stocks typically offer you, so that you can buy stock with your dividend payments (instead of taking the cash). The cost of buying this stock is FREE, which is the best part, so I get more stock in something I already hold stock in AND I don’t have to pay any brokerage fees.
Doesn’t that sound like a good idea? Any left over moneys goes to my account, and typically you are only allowed to buy whole stock (i.e. you can’t buy 1.5 shares of XYZ).
The only problem I have run into, is that I usually didn’t own enough common shares to get a large enough dividend to buy a share when dividend time rolled around, but this time two of my stock came in!!! Whoo Hoo! I own 3 more shares! Not much? Well, we’ll see, but it’s a start!