DRIP Brokers List
| Brokerage |
DRIP Plan |
Fractional Shares |
DRIP Program Details |
| Ally Invest | Yes | Yes | All marginable U.S. equities and selected American Depository Receipts (ADRs) priced at $4 or more are eligible for DRIP. Learn more |
| Charles Schwab | Yes | Yes | All securities that pay dividends are eligible, including ETFs, ADRs, and mutual funds. Clients can either enroll individual securities or their entire account. Learn more |
| Chase | Yes | Yes | All marginable securities are eligible, including stocks, mutual funds, ETFs, and ADRs. Learn more |
| Etrade | Yes | Yes |
Most stocks and ETFs currently trading above $5 per share are eligible. ADRs and mutual funds are not eligible. Learn more |
| Fidelity | Yes | Yes | Approximately 6,000 securities are eligible. Mutual fund dividends are automatically reinvested, while stock dividend reinvestment must be activated. Learn more |
| Firstrade | Yes | Yes |
All marginable securities priced above $4 are eligible, including stocks, mutual funds, ETFs, foreign securities, and ADRs. DRIP can be set up on the day the security is purchased. Learn more |
| Interactive Brokers | Yes | Yes | Only U.S.-listed common and preferred stocks paying cash dividends are eligible for reinvestment. |
| M1 Finance | Yes | Yes | Dividends are paid into the brokerage account balance. When a dividend payment causes the cash balance to exceed your cash control threshold, your cash balance is automatically invested in your portfolio based on your target allocations. Learn more |
| Merrill Edge | Yes | Yes | All marginable securities are eligible, including stocks, mutual funds, ETFs, and ADRs. DRIP can be activated on specific securities or the entire account. Learn more |
| Moomoo | No | No | DRIPs not offered |
| Robinhood | Yes | Yes | All securities with fractional share investing are eligible. Learn more |
| Sofi Invest | Yes | Yes | All SoFi accounts, except Automated Investing accounts, provide DRIP. Learn more |
| Sogotrade | Yes | Yes | All listed NASDAQ stocks and ETFs are eligible. To enroll, clients must send a request to services@sogotrade.com |
| Tastytrade | Yes | Yes | All listed stocks and ETFs are eligible. To enroll, contact customer service. Learn more |
| TIAA | Yes | Yes | DRIP can be applied to most of the account types available at TIAA. Learn more |
| Tradestation | No | No | DRIPs not offered |
| Vanguard | Yes | Yes | All marginable securities are eligible, including stocks, ETFs, mutual funds, FundAccess® funds, Vanguard mutual funds, and ADRs. Learn more |
| Webull | No | No | DRIPs not offered |
| Wellstrade | Yes | Yes | To activate DRIP, contact customer service. Learn more |
| Zackstrade | Yes | Yes | All securities that pay dividends are eligible, including ETFs, ADRs, and mutual funds. Clients can either enroll individual securities or their entire account. Learn more |
How DRIP Works
Dividend reinvestment plans come in a couple of different forms. You have the brokerage version, where your dividend payouts are automatically reinvested on your behalf (by the broker), and the direct version, where the companies you invest in convert your payouts into shares automatically. Most of today’s discount online brokers reinvest your dividend payouts for you.
Whichever version of DRIP you take advantage of, the effect on your account is the same. The more you invest in the companies you believe in, the higher your dividend payouts become. As your dividends are paid back into the positions that generated them, both the size of the position and the future dividend payouts increase. This relationship compounds and allows for exponential growth over time.
Dividend Reinvestment Plan Details
There are some helpful things to know about to select the best broker for DRIP investing.
Setting Up DRIP
Different brokers handle setting up DRIP differently, but most are quite similar. DRIP is an ‘opt-in’ service most of the time and can be activated in your brokerage account settings. Some brokers also allow DRIP to be activated on specific securities, and some allow dividends to be reinvested in a position of your choosing (instead of automatically being reinvested in the same security that generated them).
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Costs and Fees
There is one main cost advantage to obtaining shares using DRIPs. As dividends are automatically converted to shares (or fractional shares), investors are spared the brokerage fees (commissions) that usually come with initiating transactions themselves. That may not seem like a big deal nowadays due to many brokers operating on a commission-free basis.
However, some brokers still charge trading commissions.
In fact, even brokers that advertise a zero-commission model often charge for specific securities. ADRs and stocks trading on the OTC market are examples of exceptions to the no-commissions rule at most brokers. Using DRIP helps you avoid those fees.
Securities
If you want to set up a dividend portfolio using specific securities, you’ll want to ensure that your broker not only offers the investment vehicles you are looking for but also allows DRIP on those securities.
The securities included in DRIP programs vary from broker to broker since brokers tend to offer different investment vehicles. While all U.S. brokers provide access to dividend stocks and ETFs trading on U.S. stock exchanges, access to vehicles like mutual funds, ADRs, and OTC-market securities differs between brokers.
Taxes with DRIP
Dividends are considered earnings, and they are taxable income.
Brokers try to make it as easy as possible for investors to report DRIP taxes, but losing track of how much you have earned through dividend payments throughout the year is typical.
To help with this, your brokerage statements clearly itemize your dividend payouts. Remember to check your brokerage statements carefully when filing tax returns.
Some details to look for are how much you got paid in dividends, what kind of dividends they were (qualified dividends offer lower tax requirements), and how those reinvestments impacted the capital gains tax of your portfolio.
DRIP Pros and Cons
In summary, there are some pros and cons to using DRIP. Your personal situation may be the deciding factor about which aspects of DRIP investing belong in which category. Here are the DRIP advantages and disadvantages as we see them.
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DRIP Advantages
- Compounding growth is one of the primary advantages.
- Dollar cost averaging may smooth the equity curve to a small degree.
- Commission Free transactions are possible, even on securities that often have commissions.
- Investors gain a more significant stake in the company over time.
DRIP Disadvantages (for some)
- Dividends come with additional tax considerations.
- Sacrificing an income stream for compounding growth may not suit everyone.
- Lack of control over how your dividends are reinvested. i.e., DRIP programs usually reinvest earnings back into the underlying.
Ben Wright is an investor, a trader, an educator, and something of an explorer. He spends his days in the markets when he is not teaching or spending time with his family. Ben writes about stockbrokers, markets, investment vehicles, promotional offers, and tools that help investors make the most of their time in the markets.
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