Re-Investing Dividends for Additional Shares

[Jluke]

I am a small $ investor.

For example, I've held SPY since 2004 and now have 20 shares.

I made two buys over that time in SPY and I think it totaled 15 shares.

Needless to say, I've always re-invested dividends for more shares.

But after 12 years, to only have 4-5 more shares is weak.


Another example: I see a similar effect with Apple stock (120 shares) where each quarter I add 0.7 shares...

Is there a magic number of shares, or a formula, that can help someone determine how many shares should be bought (or targeted) to really benefit from investing in dividend "stocks"?

I know stock price impacts number of shares at dividend time so that is one variable... and not buying shares consistently also slows things down.

thoughts or suggestions for a small $ investor - Change my ways?

[disneysteve]

I think you're viewing this from the wrong perspective.

Rather than looking at how many shares (or fractional shares) you're getting, look at the return. What % of the stock value does the dividend represent? If the stock is paying a 3% dividend, that's pretty decent assuming the stock is otherwise solid and not losing value. Your total return - increase in value plus dividends paid - is what matters over time.

[Jluke]

I think you're viewing this from the wrong perspective.

Rather than looking at how many shares (or fractional shares) you're getting, look at the return. What % of the stock value does the dividend represent?

Thanks, I figured at my small scale, % is the better way.

I guess I was questioning whether I should continue to hold such a small share count with SPY and IBM (Taxable account). Stock price is up since I bought so I have the unrealized gains.

And always second guessing if I'm doing this right... and if there is a way to evaluate future investments strictly for DRIP purposes.

[disneysteve]

Thanks, I figured at my small scale, % is the better way.

I guess I was questioning whether I should continue to hold such a small share count with SPY and IBM (Taxable account). Stock price is up since I bought so I have the unrealized gains.

And always second guessing if I'm doing this right... and if there is a way to evaluate future investments strictly for DRIP purposes.

% isn't the better way. It's really the only way to assess the value of the dividend.

Should you continue to hold what you have? If it is performing well for you and fits in your desired asset allocation, sure. If it isn't doing well or your allocation is out of whack, then you might want to change something.

It kind of sounds to me like you don't really have a plan for your investments overall.

[Jluke]

It kind of sounds to me like you don't really have a plan for your investments overall.

I do not have a formal plan outside of buy and hold forever... accumulate "savings", eliminate debt, and live well below my means yet still try to live a little with some splurges.

I'm trying to get more strategic in investing - hence some of the rookie questions on DRIP.

Investing in my taxable account was more of a hobby at this point. Thanks to AAPL, GOOG, SIRI I've doubled my initial investment for now (unrealized of course). IBM and SPY are also in this.

ROTH IRA is invested in various choices - I 've read the boglehead perspectives. I haven't switched to it, but have picked up VTI shares. as well as VYM and VWINX. XOM, CAT, BRKB, UNH, AAPL, F are also in there.

My 401k is limited to what my company offers and I do not utilize the target date fund.

Total across all 3 accounts is pushing $350k; with help from the recent market run.

[TexasHusker]

5 shares of Berkshire Hathaway today will cost you a little over $1 million.

Is that expensive? Not really - it is about 14 times earnings.

[sv2007]

I do not have a formal plan outside of buy and hold forever... accumulate "savings", eliminate debt, and live well below my means yet still try to live a little with some splurges.

I'm trying to get more strategic in investing - hence some of the rookie questions on DRIP.

Investing in my taxable account was more of a hobby at this point. Thanks to AAPL, GOOG, SIRI I've doubled my initial investment for now (unrealized of course). IBM and SPY are also in this.

ROTH IRA is invested in various choices - I 've read the boglehead perspectives. I haven't switched to it, but have picked up VTI shares. as well as VYM and VWINX. XOM, CAT, BRKB, UNH, AAPL, F are also in there.

My 401k is limited to what my company offers and I do not utilize the target date fund.

Total across all 3 accounts is pushing $350k; with help from the recent market run.

Sometimes dividend reinvestment may not be suitable; it can make a very boring hobby. If you subscribe to bogleheads, then I guess boring is good and investment will cease to be hobby worthy. Which is not to say it's bad; but seems like contrary to your goals.

$15k (your aapl and spy) /$350k = 5%, if represents a very small portion of your portfolio ( a few movements in your main portion will wipe/gain this amount.) and I think most people who wants a fun investment hobby wouldn't bother with buy-hold-forever , dividend reinvestment strategy there.

[Jluke]

401k Mutual Funds

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[Jluke]

Look into the iShares Dow Jones Select Dividend Index (DVY).

Thanks for the feedback. ETFs that I currently own:
SPY since 2004
VTI
VYM

on a side note: After earnings this week, CAT did well temporarily, AAPL hung on and didn't drop; SIRI had a huge jump and GOOG/GOOGL is up after hours since they reported at close of market. F dropped but minimal $ in that one.

I added MO on Wednesday when it dropped - got in around $66.9.

Going to tally the dividends coming my way in the next month or so to see how I'm doing.

I'm hoping for good news soon on another stock I closely watch.

After further consideration, I think I'm more interested in stocks than ETFs in my taxable and roth account; acknowledging that it's been a nice run for stocks for quite a few years.

I'll leave the 401k to the "boring" mutual funds since that is where the majority of my net worth is held.

[james.hendrickson]

Over time reinvesting dividends can really, really add up.

I like Joshua Kennon's analysis on this. If you get a chance you might consider going over joshuakennon.com and browsing around a bit.