Scottrade will soon offer a commission-free flexible dividend reinvestment program that will allow you to invest dividends from most dividend-paying stocks or exchange-traded funds that you own into most stocks or ETFs.In a previous post I discussed why I choose to do selective dividend reinvestment by combining my dividends with new capital. I also wrote a Seeking Alpha article showing how the selective method can boost long-term dividend income compared with the traditional automatic method. The nice thing about Scottrade's program is that it would allow me to do selective dividend reinvestment when I do not have new capital to invest, as is the case right now. It would be particularly advantageous for my Roth IRA, where there is a cap on how much new capital I can add each year. I welcome this innovation and I look forward to learning more details about the program when it becomes available.
The program will be different from a traditional dividend reinvestment program (DRIP), which requires you to reinvest dividends back into the securities that paid the dividends. In the Scottrade program, dividends will accumulate into a pool of funds that you can use to purchase shares of almost any stock or ETF. The choice is yours.
The Scottrade program will provide significant flexibility and is designed to let you tailor your dividend reinvestment tactics to your overall investment strategy.
Thursday, May 9, 2013
Flexible Dividend Reinvestment Coming To Scottrade
Today I learned that Scottrade (the discount brokerage I use) will soon be introducing a unique dividend reinvestment program. Many other brokerages already provide the option for automatic and commission-free reinvestment of dividends back into the stocks that paid them. Scottrade will provide more flexibility by allowing automatic but selective dividend reinvestment: dividends can be reinvested into stocks other than the stocks that paid them. Here is an overview of the program from Scottrade's website: