Polliesdividend

What do I do with my dividend?

Every month I got passive income from my Vrijheid Fonds. My companies pay me dividend with an average weighted yield of around 3,5%. And good stocks also raise their dividend on a yearly basis. And that’s what I like and want as a Dividend Growth Investor. My goal is to create a portfolio, which generate enough passive income to live of.

As you can see at my dividend income page, I have to have a plan for reinvesting my dividend. I have a rule that the cost of buying stocks (the fees my broker charges when I buy new stocks) should be max 1% of the total amount of cash I invest. Therefore my minimum amount with which I buy new stocks will be at least €1,150. As you can see the amount of dividend I receive is not enough to buy new stocks every month.

So I let my dividend accumulate in my brokerage account. And when I have enough cash (dividend and fresh capital), I will purchase some stocks. This means that at this moment I have to limit myself to buy new stocks at the end of every quarter. When my snowball will gain momentum, the interval between two purchases will be shorter.

I think it is better (and wiser) to reinvest my dividend every quarter than on a monthly basis. This way I save on fees.
The downside of this method is that it will take longer before my snowball is really running (compounding). But when it gets momentum…

I do not reinvest my dividend in the original stock. I selectively reinvest my dividend. Through this way I can determine which stock is the best buy at that precise moment. I like to control my purchases (in most cases).

Because besides my quarterly purchase I also have drips installed for my two favorite Dutch stocks; Royal Dutch Shell and Unilever. Every quarter I get two new (free) stocks of RDS-A and one new (free) Stock of UN.

How do you reinvest your dividends?

Cheers,

Pollie

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3 thoughts on “What do I do with my dividend?

  1. M

    Pollie, this is almost exactly the same as what I do. I think it’s really wise to minimise your fees by selectively reinvesting when you have enough capital, as the fees really do eat into your returns like there’s no tomorrow.

    Fortunately for me, I have a ‘regular investing’ option which allows me to pay only £1.50 to purchase each stock, so I try to have at least £150 for any stock I would like to invest in. Sometimes I make no trades in a month, but sometimes I’ll make a few, or just one bigger one.

    Cheers

  2. roadmap2retire

    I follow a similar strategy. I have two companies (KMI and OHI) where my holdings are big enough to a DRIP a complete stock – and I drip them each quarter. But the rest of my dividends, I let the cash accumulate and invest it elsewhere when and where I see value.

    Thanks for sharing your approach
    R2R

  3. DivGuy

    Basically same strategy as mine too! There’s no point in making monthly purchases if you pay too much fees on them. I’m not sure it takes longer to get compounding effect that way… You’re simply doing what’s wiser with what you’ve got. I don’t know many investors who started out investing with millions… Most started out just like you and grew up faster than they thought. Hopefully, we’ll reach that level sooner than later too! 😉

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