03-31-2014, 01:00 AM
(This post was last modified: 03-31-2014, 01:04 AM by Dividend Watcher.)
I drip everything right now but am thinking of turning some off.
I think there's a lot of consideration as to your age, investment temperament and size of the portfolio.
Age gives you plenty of time to build all those new positions you're establishing. This probably ties in with your temperament. Taking the dividends in cash has a lot of flexibility. The problem becomes, are you willing to keep adding to those smaller positions as the money is available? What happens if you end up with a portfolio of 50 positions of 5 or 10 shares apiece? Is it worth it to monitor that many companies worth only a few hundred dollars year in and year out? Even a double would only net you several hundred dollars for hours spent scouring earnings releases or annual reports. On the other hand, it does give you the flexibility to add companies to your portfolio you have some conviction about.
If your reinvest, do you think that in 10 or 20 years the company will still be performing similarly? That's a long time for a company to navigate without something changing either in the business or the economy. Kodak looms large in my mind but there are others. Are you willing to stick with it when things look dreary?
Then there's portfolio size. If the dividends don't add up to much and you don't have a regular infusion of cash to add and keep commissions low, is it worth it? My wife's portfolio is significantly smaller than mine and won't generate enough dividends to add a worthwhile position for almost a year. Sure, we added cash quite regularly but YTD her business is down 60% and mine about 15% so right now the account is treading water. For her, she'll be DRIPing for a while which is OK because none of her holdings are wildly overvalued and I've done all the re-balancing I wanted to do except for one open limit order. When business comes back, we'll get back on track. In the meantime, cash is earning zilch so better to reinvest and let those small sums compound.
As for me, I've finally reached a point where I will probably turn off reinvestment on those positions which are too large in the portfolio or their growth rate has slowed; CVX, T, PEP and maybe a couple others. I am loath to keep trimming positions just because they are too big; especially when I feel they are still fairly valued and have promising outlooks. If I turn of the reinvestment on my large holdings, then I can redirect it to those issues that are under-represented that I want to add to and are fairly to undervalued. My thinking is if I buy only a partial position, I want a plan to add more within a year to 18 months to get it closer to a full position. That's part of my plan to accomplish it.
Neither position is wrong. The tough part is coming up with a plan and sticking to it.
I think there's a lot of consideration as to your age, investment temperament and size of the portfolio.
Age gives you plenty of time to build all those new positions you're establishing. This probably ties in with your temperament. Taking the dividends in cash has a lot of flexibility. The problem becomes, are you willing to keep adding to those smaller positions as the money is available? What happens if you end up with a portfolio of 50 positions of 5 or 10 shares apiece? Is it worth it to monitor that many companies worth only a few hundred dollars year in and year out? Even a double would only net you several hundred dollars for hours spent scouring earnings releases or annual reports. On the other hand, it does give you the flexibility to add companies to your portfolio you have some conviction about.
If your reinvest, do you think that in 10 or 20 years the company will still be performing similarly? That's a long time for a company to navigate without something changing either in the business or the economy. Kodak looms large in my mind but there are others. Are you willing to stick with it when things look dreary?
Then there's portfolio size. If the dividends don't add up to much and you don't have a regular infusion of cash to add and keep commissions low, is it worth it? My wife's portfolio is significantly smaller than mine and won't generate enough dividends to add a worthwhile position for almost a year. Sure, we added cash quite regularly but YTD her business is down 60% and mine about 15% so right now the account is treading water. For her, she'll be DRIPing for a while which is OK because none of her holdings are wildly overvalued and I've done all the re-balancing I wanted to do except for one open limit order. When business comes back, we'll get back on track. In the meantime, cash is earning zilch so better to reinvest and let those small sums compound.
As for me, I've finally reached a point where I will probably turn off reinvestment on those positions which are too large in the portfolio or their growth rate has slowed; CVX, T, PEP and maybe a couple others. I am loath to keep trimming positions just because they are too big; especially when I feel they are still fairly valued and have promising outlooks. If I turn of the reinvestment on my large holdings, then I can redirect it to those issues that are under-represented that I want to add to and are fairly to undervalued. My thinking is if I buy only a partial position, I want a plan to add more within a year to 18 months to get it closer to a full position. That's part of my plan to accomplish it.
Neither position is wrong. The tough part is coming up with a plan and sticking to it.
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“While the dividend itself is merely a rearrangement of equity, over time it's more like owning an apple tree. The tree grows the apples back again and again and again, and the theoretical value of the tree doesn't change just because of when the apples are about to fall.” - earthtodan
“While the dividend itself is merely a rearrangement of equity, over time it's more like owning an apple tree. The tree grows the apples back again and again and again, and the theoretical value of the tree doesn't change just because of when the apples are about to fall.” - earthtodan