Because I am a dividend growth investor, I think about ways to maximize dividend growth with reasonable safety. I like the automatic increases that come when a company annually increases the dividend, because I don’t have to do anything to get the increase. Of course, this approach requires a long-term perspective and patience.
Due to the recent changes Fidelity Investments and other brokers have made to the cost of trades, there is zero cost to trade even a single share. This makes automatic dividend reinvestment less attractive. The reason is simple. It is possible that you could get a better price for an additional share if you took the dividend as cash and then reinvested it when you saw a dip in the market. This may be beneficial for those who actively monitor their positions and incoming dividends, so those who don’t have the time or interest are usually better off using automatic dividend reinvestment. At the present time in my IRA accounts automatic dividend reinvestment is turned on at Fidelity for the following positions: ITW, XOM, INTC, NEE, PAYX, VYM and WMT. Many others no longer automatically reinvest.
For the grandchildren’s UTMA accounts, automatic dividend reinvestment is turned on for all of their positions. This includes these ETFs: DVY, DGRO, FHLC, FTEC, FENY and VYM.
For Cindie’s ROTH IRA, automatic reinvestment is on for ETFs DVY, SCHD and VYM. One other advantage of this approach is that even fractional shares are purchased with the dividends. Pennies become dollars over time.
At Fidelity, you can change your reinvestment settings by going to ACCOUNT FEATURES, Brokerage & Trading, “Dividends and Capital Gains.”
Here is a link to Wallmine for DGRO: https://wallmine.com/etf/DGRO