Tuesday, July 14, 2009

Dividend Reinvestment Over Time

If you are here at this site, or any of the other sites as part of the network, chances are you are interested in dividend investing in one form or another. With that in mind, then I would like to present one of my favorite charts with respect to dividend investing. It has to do with the concept of dividend reinvestment and the dramatic power it has over investment results in a portfolio. In essence, by ensuring an investor reinvests his/her dividends the improvement in a portfolio is profound. Here is the chart:

As you can see, since 1900 the equity returns for both the US and UK markets have been improved by approximately 5% by simply reinvesting those dividends. I think the chart speaks for itself. It is why I continue to reinvest my dividends.

This article was written by The Dividend Guy. You may email questions or comments to me at info@thedividendguyblog.com.


  1. Many companies even offer commission-free dividend reinvestment plans for their stock to make the process easier.

  2. I used to do DRiP and DSP plans.

    Today it is much easier to get an account at ShareBuilder or another brokerage which offers free dividend reinvestment. One relationship with that broker replaces MANY different relationships -- one with each company -- incurred using DRiP and DSP plans, each with their individually unique plan documents, legal agreements, procedures, timing and fees.

    The only advantage with DRiP and DSP plans is that you are recorded with the company as the owner of the stock, whereas with a broker your shares are held in "street name" for you by the brokerage. No problem.

    Hassle with individual plans for each stock? Not in the 21st century, no thanks!

  3. I actually prefer cost free DRIPS. Sharebuider still costs $4 a trade which can add up over time. Especially if you are only investing $50 or $100 at a time.


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