3

If one owns 6000 shares KO, would it be wise to use drip (as always have) or invest on my own? Having taken over the stock from a broker who used DRIP, I noticed that last April, I got less dividend because stock price was $47.00. Because I watch charts daily, wouldn't it be wise to invest when KO is down and before ex-date. However right now KO is going up..so waiting for a drop before 3/11/2017. In the end (long term), I do not know if it makes a real difference. I have handled my own stocks for only a few months. I'm sorry, I haven't taken a course yet on what to watch.,i.e., earnings.etc.

If I have 12,000 shares of KO, 1 or 2 pennies up or down is hundreds of dollars. I have lost 40K this year so am trying to buy low. brokers don't focus on trade price with reinvesting.With F, I bought @11,00./ share X3 this year,even though chart does not show it dropped that much..I am patient. BUT KO ex date is around 3/11. I have a large bid @40.52...Maybe I will raise it but now now..Will the lower earnings cause people to sell? Can one anticipate if KO will drop before 3/11 or keep rising?

  • Define "drip", please. And check past questions about how stock price moves with respect to dividends; in the ideal case it doesn't really matter much. – keshlam Jan 6 '17 at 20:42
  • @keshlam DRIP (acronym, caps) = investopedia.com/terms/d/dividendreinvestmentplan.asp a system where when a stock pays (cash) dividends they are immediately invested in additional fractional shares without any specific action by you. It's also a pun, because it leads to slow but more or less steady accumulation over time, like dripping water from a leaky pipe. – dave_thompson_085 Jan 6 '17 at 22:05
  • 2
    In hindsight it's easy to see the highs and lows. – quid Jan 7 '17 at 0:02
  • 2
    Gratuitous useless acronym. It takes longer to define and justify than to use the proper term in the first place. Use the term that your readers will understand, if you want them to respond. – keshlam Jan 7 '17 at 0:02
  • 1
    The purpose of DRIP was to buy directly from the company. For example by KO shares from KO without the need for commissions. Many companies even gave a small discount. If there are fees to buy and sell then the main benefit for the investor is gone. – mhoran_psprep Jan 7 '17 at 12:30
5

The benefit of a dividend reinvestment program is you, generally, don't pay transaction costs or commissions and you don't have to remember to do it. Whether or not you may be able to eek out a little more by managing this yourself is a crapshoot and the equivalent of timing the market.

If you're so good at timing the market you shouldn't even be holding the stock, you should be buying and selling as the price fluctuates.

4

Unless you suffer from the illusion that you can time the market, it honestly doesn't matter much; the difference is lost in the noise.

That may be true even if you do suffer from that illusion.

Also, as discussed here previously, the drop in a stock's price right after the dividend has been paid just reflects the fact that you aren't about to get an immediate refund in the form of a dividend. If you look at the real cost per share, it's meaningless and can/should be ignored. Buying after the dividend is paid may save you a tiny fraction of a cent of short-term income tax, but that's meaningless in real terms.

-1

Yes you can do that and it it wise to do so. However, you should make sure that the general trend of the stock is upwards and you buy during a trought in the uptrend.

So basically if the stock is making higher highs and higher lows on the daily or weekly charts, then you would want to buy around one of the higher lows before the ex-dividend date.

If the stock is making lower lows and lower highs, then it is in a downtrend, so never buy in this instance. It is better to miss out on a dividend of $1 rather than to buy just for this $1 dividend and lose $5 or more when the price continues to drop further.

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.