How do I set up dividend reinvesting?

Tell your broker you want your dividends reinvested. With most brokers, you can let them know whether you want to automatically reinvest the dividends of all of your stocks or the dividends of specific stocks.

The great thing about doing it through your broker is that it is usually free. Additionally, you’ll receive fractions of shares, which will compound faster because you won’t have to wait to buy whole shares.

For example, if you own 100 shares of a stock that is trading at $20 and your dividend is $0.82 per share, you will receive $82 in dividends.

If the dividends are automatically reinvested, you’ll be able to buy 4.1 shares of stock. That tenth of a share will also generate a dividend and help you compound your wealth faster. Often, it’s possible to reinvest the dividend directly through the company itself, though our experts don’t recommend this in most cases. There are often fees to reinvest or sell the shares. Additionally, it will be another account to keep track of.

If you are reinvesting dividends in 10 stocks directly through each company, that’s 10 accounts you need to keep track of, 10 sets of paperwork and 10 sets of tax filings.

If you reinvest all of your dividends through your broker, you’ll have only one account to deal with.

Automatically reinvesting your dividends is often known as a DRIP, which stands for dividend reinvestment plan. You may see our experts or your broker refer to DRIPs when talking about reinvesting dividends. As noted above, DRIPs can be set up through your broker or often directly with the company whose stock you own. You can also visit this helpful dividend reinvestment calculator to see how you can enhance the value of your portfolio.