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DRIP Brokers For No-Fee Dividend Reinvesting in 2023
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Best Brokers for DRIP Investing
Instead of receiving cash distributions as dividends, several online discount brokerage firms offer a
Dividend Reinvestment Plan (DRIP) that takes such cash payments and converts them into additional
shares of the stocks or ETFs that paid them. Firstrade, Robinhood, and TD Ameritrade are
three best brokerages for dividend reinvesting.
Robinhood DRIP Program
DRIP service is free of charge at Robinhood and is available for both stocks and ETFs. It’s really easy to turn on a DRIP for an entire account or just for individual securities. Just click on the Account link in the upper-right corner of the website. In the drop-down list that appears, click on the Settings link. On the next page, select the Investing link that shows up in the left-hand menu. Now, you’ll see the dividend reinvestment link. Click on this option to establish the account’s DRIP settings.
There is a toggle switch to turn the DRIP on or off for the entire account. Obviously, if the DRIP is turned off, then no securities in the account will be eligible for dividend reinvesting. Turning the toggle switch to the on position will enable dividend reinvesting for all securities.
If you decide that you don’t want cash payments reinvested for a particular stock or ETF, simply uncheck the security in the DRIP settings on the Investing page just mentioned. Other securities will remain checked, so their dividends will be reinvested.
If you later change your mind, simply re-check the security to turn the DRIP back on for the stock or ETF that was unchecked earlier.
Remember that once the DRIP is turned on for a particular security, any cash distribution it makes in the future won’t be received in the account’s core cash position, as is the usual case. Instead, the position will receive additional shares, which typically are fractional shares.
Some stocks and ETFs don’t pay dividends at all. Tesla is one such example. Although these securities will appear in the DRIP section on the Robinhood platform if the account holds such positions, turning on DRIP for them won’t result in any additional shares being earned unless the company declares a dividend in the future.
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The first difference we will see here is that Firstrade offers mutual funds. To set up recurring dividend reinvestments on a mutual fund, you simply need to specify a reinvestment of dividends and capital gains on the mutual fund trade ticket. There is a radio button to specify this choice. It is not possible to reinvest either capital gains or dividends. It is either or both at Firstrade. If you want cash distributions paid into the account, just select the radio button to pay distributions as cash.
The process for stocks and ETFs is a little different. First, you’ll want to go to the positions page on the website. This can be accessed by hovering over the Accounts tab in the top menu and selecting Positions from the drop-down list of choices.
At the top of the Positions page, there is a link for dividend reinvesting choices. Click on this and you’ll get the page for DRIP settings. The account’s stock and ETF holdings will be shown here. They can be filtered by enrollment status, and this is a good way to see which securities are eligible for dividend reinvesting, and which ones are not.
It is possible to enroll specific holdings at Firstrade or the entire account. An equity must be trading above $4 to be eligible for dividend reinvesting. It goes without saying that said security must also support fractional shares.
It can take up to 3 business days for Firstrade’s DRIP service to go into effect.
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Stocks, ETFs, and mutual funds are eligible for dividend reinvesting inside a Schwab brokerage account. Anytime one of these securities makes a distribution of cash, the money will be reinvested as additional shares. This is done on autopilot, so there’s nothing the account holder needs to do, and the broker charges nothing for its DRIP service.
Securities at Schwab are not automatically enrolled in dividend reinvesting, and unfortunately, an entire account cannot be enrolled or unenrolled. Each security you purchase has to be enrolled, but this is easy to do.
On Schwab’s order ticket, there is a check box labeled Reinvest Dividends. If you want cash distributions for the stock or ETF to be automatically reinvested, make sure you check this box. Otherwise, dividends will be sent as cash to the brokerage account’s core position.
If you forget to check the box or later change your mind, you can always sign up for DRIP on the positions page. This will be found by hovering over the Accounts tab in the top menu and then selecting the Positions link.
On the page that appears, you’ll see a list of all the investments in the account. One of the columns is a “Reinvest?” link. For each holding, there will be a Yes link in the column if the security has been enrolled in dividend reinvesting. The link will display a No if it hasn’t been enrolled. Just click on the link to change the current setting.
Mutual funds in this column will have a second link for capital gains distributions. As with stocks and exchange-traded funds, the order ticket for mutual funds has a setting for cash distributions.
Charles Schwab does not charge fees or commissions for its dividend reinvestment plans.
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Chad Morris is a financial writer with more than 20 years experience
as both an English teacher and an avid trader. When he isn’t writing
expert content for Brokerage-Review.com, Chad can usually be found
managing his portfolio or building a new home computer.
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