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. This because the amount of dividend each month is too low to make a purchase every month. 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.
Besides my quarterly purchase I have also two 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?