DRIP can be a Strategy Too!

14 Mar 2015 13:40
Tags drip

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It is no secret I like all of my dividends to pool into a large amount to help me purchase positions in other companies where I see better growth opportunities or to help diversify my portfolio. But now that my portfolio is fairly diversified (27 positions) I had to rethink my strategy.

Within my portfolio I am seeing value buys in relation to dividend growth & price. When your portfolio positions are telling you there are bargains it makes you stop and think. Since my broker offers a commission free dividend reinvestment program (DRIP) I decided to DRIP some positions.

One might argue I could continue to pool all my dividends and simply increase my position by a larger amount to capitalize but that theory presents two problems for me. The first is that this is not commission free and commissions could eat away at long term gains.

The second problem is portfolio weightings, if I buy larger positions the portfolio will start to become over-weight in just a few positions. This would definitely contradict my risk aversion strategy and is not appealing.

Using a DRIP solves both of my concerns, it allows for commission free purchases and to slowly increase my position all the while still being able to capitalize on the buy opportunity. Of my 27 positions here are the ones I started a DRIP program with:

MHLD – Maiden Holdings
MSFT - Microsoft
QCOM - Qualcomm
THO – Thor Industries

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