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  1. #1

    Default Dividend Re-investment Plan: To Join or not to Join?

    Recently bought some shares and the company sent me out a letter with their welcome pack if I want to participate in their dividend reinvestment plan.

    What are the pros and cons of joining or not. What do most of you do?

  2. #2
    Self Funded Retiree Bill M's Avatar
    Join Date
    Jan 2008
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    Sydney and Central Coast NSW
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    1,342

    Default Re: Dividend Re-investment Plan. To Join or not to Join?

    I don't do it ENP. What I hate most is that the new shares they issue you with is quite often priced higher than the current on market buy price.

    I pool all my dividends then buy what I want at the price I want and when I want and usually it's better than the dividend re-investment plan price.

    There is also the individual capital gains tax calculations that need to be done when sold at tax time. Each parcel has to have it's own CGT calculated. (not really a problem if you have a program to do it for you)

    The only 2 positives I can see (if you can call it that) is dollar cost averaging back into the stock and not paying brokerage.

    It just isn't worth the trouble for me, cheers.
    There's one thing we have learnt from history, it's that we don't learn from history.
    Nothing I say is a recommendation or advise, do your own research.

  3. #3

    Default Re: Dividend Re-investment Plan. To Join or not to Join?

    Quote Originally Posted by Bill M View Post
    I don't do it ENP. What I hate most is that the new shares they issue you with is quite often priced higher than the current on market buy price.

    I pool all my dividends then buy what I want at the price I want and when I want and usually it's better than the dividend re-investment plan price.

    There is also the individual capital gains tax calculations that need to be done when sold at tax time. Each parcel has to have it's own CGT calculated. (not really a problem if you have a program to do it for you)

    The only 2 positives I can see (if you can call it that) is dollar cost averaging back into the stock and not paying brokerage.

    It just isn't worth the trouble for me, cheers.
    +1

    exactly what Bill said.
    The early bird makes the early worm look pretty stupid.

  4. #4

    Default Re: Dividend Re-investment Plan: To Join or not to Join?

    Quote Originally Posted by ENP View Post
    Recently bought some shares and the company sent me out a letter with their welcome pack if I want to participate in their dividend reinvestment plan.

    What are the pros and cons of joining or not. What do most of you do?

    Which company?

    I did it with RIO during the GFC as l was doing lots of travel in remote areas in WA and didn't have access to internet to buy/sell, different circumstances l guess. Anyways, it turned out well while l did the trade, l got a 100% return on RIO (with dividends included) in a 12 month period.

  5. #5

    Default Re: Dividend Re-investment Plan. To Join or not to Join?

    Quote Originally Posted by Bill M View Post
    I don't do it ENP. What I hate most is that the new shares they issue you with is quite often priced higher than the current on market buy price.
    This is true for TAH at least in my experience. Everytime they send me a letter telling me at what price the DRP works at, they claim it is a discounted figure from that taken over a period of time, but by the time it's actually paid, the SP has always been lower than that discounted figure.

    FML.

  6. #6
    The Contrarian Averager So_Cynical's Avatar
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    Aug 2007
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    Sydney - Muntinlupa
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    5,214

    Default Re: Dividend Re-investment Plan: To Join or not to Join?

    I do it when the shares will be issued at under my original buy price or say perhaps 20% above but no more than that...i like averaging down but not up, so recently im in all the div reinvestment plans my shares are running...planning on exiting most in May now that the market has had a run up.

    The pros and cons are

    Pros = No brokerage, often issued at a decent discount, handy if your compounding.

    Cons = Often issued at little or no discount and at the worst SP time, can be a CGT pain in the neck if you don't have portfolio software.
    Statistics: 127 Closed Trades since July 07, Winning Trades: 103, Losing Trades: 24, Expectancy/$1 Risked: $0.58

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