The Prudent Investor

Letting Dividends Do Their Work

Most Recent Articles

How Many Stocks Should You Own?
A reader asked me a question that boiled down to them wanting to know how many stocks should be in their portfolio.  It is a question with an answer that will be different for each person, but knowing how to arrive at that answer is simple.
Are Dividend Reinvestment Programs Dead?
Dividend Reinvestment Programs have been a staple for acquiring shares for years.  An alternative that supersedes this option is holding shares through a broker that offers the same advantages.  It is instructive to evaluate this option to determine if this DRiP still has a place for the dividend investor.
Canadians and Fee-Free Dividend Reinvestment Programs
Canadians have a different set of issues to deal with than Americans. Numerous advantages we have in the U.S. are just not available in Canada. In this article, a Canadian offers his methodology, in the hopes that it may be a starting point for others.
 

The Best of All Worlds

by George L Smyth

Finding fee-free DRiPs and companies with a long history of increasing their dividend is a great place to start when researching additions to a DRiP portfolio.

Dividend Reinvestment Programs (DRiPs) offer numerous advantages to the investor who is seeking to build wealth over a long period of time with a minimum amount of risk. This is done by selecting great companies and then making regular purchases. While others stress about the ups and downs of the market, the DRiPper understands that when the market drops those regular purchases will obtain more shares.

As noted in the last article, when fees impinge upon those purchases it can put one in a position where it may not make sense to invest. The good news is that there are hundreds of companies that offer fee-free purchases. These include AFLAC, Johnson & Johnson, 3M, Aqua America and Exxon, which are the companies in my DRiP portfolio.

It could take a lot of research to figure out which companies offer fee-free DRiPs but DirectInvesting.com maintains such a list. DirectInvesting.com is a company I have used over the years to purchase that first share and start my DRiP. I have also taken the route of finding a less expensive means of doing this but there is value to saving time and enjoying convenience, so it's up to you to decide which route to take.

One of the knocks about purchasing dividend stocks is that the dividend may get cut or even eliminated. Without question, this is something that should be taken into account. If one purchases a company because the dividend offers risk mitigation and that safety net goes away, then the reason for holding the stock may also go away. This is not good for a long term strategy where risk is a consideration.

Many years ago I met Dave Fish, who was one of the initial moderators at DRiPInvesting.org when I created the website in 2002. He maintained a list of what he called Dividend Champions (as well as Contenders and Challengers) and I started posting that list every month because I felt that it was so important.

Dividend Champions are companies that have increased their dividend every year over at least the past 25 years. Of course nothing is guaranteed going into the future, but when I think about a company that continued to increase its dividend every year during the fall of the internet stocks at the beginning of the century, as well as through the financial crisis that began in 2008, I know that that is a company committed to their dividend.

Included in the list of Dividend Champions are Contenders (companies that have increased their dividend every year for 10-24 years) and Challengers (companies that have increased their dividend every year for 5-9 years).

When Dave Fish passed away the list was taken over by Justin Law, who updates it on a monthly basis and uploads it to the Information, Tools, And Forms page at DRiPInvesting.org.

Combining the two lists to find the intersection of companies with fee-free DRiPs that have increased their dividend for at least 25 years is an essential starting point for anyone wishing to find a company that might offer stable dividends going into the far future.

Dividend Champions With Fee-Free DRiPs (November 2019)

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