Firstrade

Firstrade DRIP: Dividend Reinvestment Program


2018 Firstrade dividend reinvestment program fee and setup, commission, fractional shares. Firstrade DRIP plan enrollment for stocks, mutual funds, ETFs, and ADRs. Is it free?



Firstrade’s DRIP Service


Investors at Firstrade have access to a free Dividend Reinvestment Plan (DRIP) that will convert cash distributions into additional shares of the securities that pay them. One stock or ETF can be enrolled, or an entire account. There is no charge to sign up, and even better, the broker-dealer does not charge any commissions when additional shares are purchased with dividends.


Firstrade DRIP Requirements


A stock or ETF must have a market price of $4.00 or higher to be eligible for Firstrade’s DRIP. The security must also be marginable. This means it must be eligible to be borrowed. Not all securities are marginable. For example, recent IPO’s and Bulletin Board stocks aren’t marginable under U.S. securities regulations. Firstrade can also set its own policies regarding what’s marginable and what’s not.

Some foreign stocks are eligible for Firstrade’s DRIP. In order to receive shares of the security instead of cash, the equity must be purchased and the trade settled by the record date of the dividend.


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Firstrade DRIP Plan Details


Firstrade’s service will credit both whole shares and fractional shares. Reinvested shares are purchased at market price on the payment date of the dividend. If a cash dividend doesn’t translate into one whole share, a fractional share will be credited to the account.

All of this is done automatically by Firstrade’s computer systems. Suppose you receive a dividend for stock ABC. It’s $0.25 per share, and you own 800 shares. That’s a total of $200 in cash. If ABC is trading at $50, you would receive exactly 4 additional shares. If the stock is trading at $40, you would get exactly 5 shares. If the stock is trading at $38, you would receive 5.263 shares.


Firstrade Dividend Reinvestment Program


In reality, there is no such thing as a fractional share in the U.S stock market. Firstrade takes all the dividends that its customers receive from a given stocks, and uses that pile of money to purchase as many shares as possible. It then distributes those shares to its customers. The broker will add a fraction to your account if it needs to, but that’s just an accounting service. At the next dividend, the broker will purchase a whole share, or if you liquidate that fraction, Firstrade will exchange it for cash at the going market rate.


Enrolling in Firstrade’s DRIP Program


To sign up for Firstrade’s DRIP service, you simply need to go to ‘My Accounts’ on the broker’s website, and then choose ‘Positions.’ Here, there will be a link that says ‘Dividend Reinvestment Plan.’ Specific securities can be enrolled and disenrolled. Another option is simply to enroll an entire account. Firstrade requires that at least one security be in an account to choose this option.


Firstrade Mutual Funds DRIP


Dividends and capital gains distributions for mutual funds can be reinvested or paid as cash. The broker’s mutual fund order form has a selection where either option can be chosen. Technically, this is a different service than the DRIP.


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