Reinvesting 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. 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?



10 thoughts on “Reinvesting my dividend

  1. D4s

    Fortunately, both of my taxable and tax deferred accounts allow free reinvestments so i just set the flag to reinvest. I know that this option is not widely available especially outside of the US.

  2. Captain Dividend

    I have a similar rule to your 1% rule. I never invest less than $1000 per trade. Personally I do it monthly partly because I’m always excited to make a purchase and increase my dividends as soon as possible. Also waiting a quarter will often times force you to miss out on some cheap stock prices. For example KMI was under $15 last month and is now nearly $19 ! I can certainly see a benefit to waiting though and lowering those pesky commission costs.

  3. DivHut

    In general, I reinvest my dividends automatically. I’d say that over the years this has been the case 99% of the time. Very rarely do I take the dividends as cash and selectively reinvest. I realize that over time I may be buying shares automatically at higher values but I also buy them at lower values too. By reinvesting automatically you allow your passive stream to compound faster and grow all your positions as well.

  4. alex

    thats the great thing about td ameritrade it allows you to pick which stocks you can DRiP ( i only drip things below my cost basis or that are 5% above) and turn off things that appear over valued

  5. Team CF

    We are also a fan of automatic reinvesting of dividends (especially when there are no fees associated with this reinvesting). But in your situation, when you are still expanding the portfolio and don’t have enough of certain stocks to be able to reinvest. Taking cash dividend + adding new capital may be a very good option!

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