To DRIP or not to DRIP

[ourkid8]

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...

 

Shahed

[beerbaron]

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

 

BeerBaron

[Uccmal]

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.  

[Myth465]

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

 

BeerBaron

 

Agreed,

 

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.