To start with lets start with what is a DRIP. A DRIP is a Dividend ReInvestment Plan, where your dividends are reinvested into the security that is paying you the dividend. You can do this through transfer agents like ComputerShare.com and you can also do this through a lot of your online discount brokers.
My holdings aren’t large enough to obtain whole shares a lot of the time.
Instead of cost averaging my holdings, I would rather reinvest my capital into other better valued securities.
Although I haven’t had to encounter this yet, apparently it is easier when it comes to tax time. I will update on this more in the future, when I approach my first tax season as an investor under the 2017 tax bill.
Being new to investing there is a lot of decisions to make that will affect you on your journey. When I purchased my first stocks ( LOAN ) , I decided that I wanted to DRIP the dividends. It seemed like the reasonable decision at the time. The position that I held at the time allowed me to DRIP and gain whole and fractional shares. Although it worked out this way the first time, it did not quite work out this way the next time.
After I had started my next position in ( XOM ), I decided to do the same thing and to DRIP this holding as well, even though it would only increase my holdings by fractional shares. As the Ex-Div Date for my Exxon Mobil holding approached I started to debate my decision to DRIP this position like I had done previously. Once the div was DRIPed it wouldn’t even add .1 shares to my current position in the company. Although I had started debating the outcome, I did not act in time before the first dividend was reinvested into the position.
At this point I had searched for other peoples opinions and their pros and cons of the situation. After weighing all the different criteria I finally decided to reverse my decision and chose not to DRIP any of my holdings. These are the reasons why ….
Although this is my current decision on this matter, as the market changes I will reevaluate my position and adjust according in the future. I would be interested in hearing anyone elses opinion on this situation.