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To DRIP or not to DRIP


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I have always wondered what is other board member's opinion on setting up a Dividend Reinvestment Plan (DRIP) plan on your stocks. I have numerous investments I do plan on holding for the long term (10+ years) and debating if I should DRIP or not to DRIP...


There are numerous investments I have sizable gains and when the company pays a dividend I buy shares at a significant higher price than my book value.  I do not mind as I am adding to my position.  There are other investments I am slightly in the red and it lowers my book value with the dividend payment which is nice.  I know you are suppose to buy when you feel the company is selling below intrinsic value and with a DRIP, you do not have control when you purchase additional shares.


Let me know what you are doing...



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I tried this once and decided it wasn't worthwhile.  I would rather receive the cash and allocate as per Beerbaron's comment.  However, I do appreciate companies who offer Drips where a lot of people participate, and the company gets to keep the cash, but still pays me to allocate the capital to greener pastures  :).  The discount on shares offered is generally not enough to excite me and at 5% is generally within the swings of any normal companies' stock price.    


Part of it is that I simply dont trust management of most companies to do a better job at allocating my capital than I can.  Its like share buybacks - I'd rather get a dividend from nearly all companies rather than see buybacks for the same reason.

Buybacks are seldom done well.  

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I buy when it's low and sell when it's high. Not at the quarterly dividend dates...






You can do much better parking that dividend in cash and then buying on down 3% days and maybe selling on up 4% days a few months later. I would only DRIP if buying what I wanted would move the stock. Luckily or unluckily I am not there yet.

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