Reasons You Should Avoid Dividend Reinvestment Programs
Reinvesting your dividends to keep growing your portfolio is always a smart move. That’s why many big dividend stocks offer dividend reinvestment programs, or DRIPs, which automatically reinvest your dividends into more shares of the company. Many brokers have made it easy to set up automatic dividend reinvestments for your stocks as well.
But dividend reinvestment programs aren’t nearly as useful in the age of free stock trades as they were when you used to have to pay your broker a minimum fee for each trade you made. You can invest as little as $1 in fractional shares with no additional fees with a lot of brokers. So, the benefits of a DRIP have been erased.