Should you re-invest dividends or take the cash? You often hear about the benefits of enrolling in DRIPs (and I agree with all of them) but today I’m going to present an alternative view of reinvesting dividend and explain why personally I take the cash.
The main reason I chose cash over the DRIP plan is that I like to determine the price at which I buy a stock. Additionally, I plan on keeping most of my dividend paying stock indefinitely and the DRIP programs would result in many of my holdings becoming too large a percentage of my portfolio. For example, TD is already approximately 14% of my portfolio and I’ve held it for 5 years however if I’d been in the DRIP it would probably be around 17% or 18% (and growing). Instead I took the dividends and reinvested them in other high paying dividend stocks (when I thought they were on sale). If there ever reaches a point where a dividend paying stock falls below a reasonable percentage allocation in my portfolio I will wait for a price I believe is fair and purchase more to bring the weighting up.