By Justin G., VP, Investor Experience and Guest Blogger
At first blush, it’s possible that many of you will look at our new flexible dividend reinvestment program and wonder what it’s all about. I’m sure we’ll hear from more than a few people who say something like: “That doesn’t look like any dividend reinvestment program (DRIP) I’ve seen before.”
To that, I’d happily reply, “That’s what we were hoping you would say.”
We spent a long time looking at the universe of commission-free dividend reinvesting, and we didn’t like what we saw. Over the last two decades, financial services have expanded to include a variety of choices on a multitude of investment products, brokerage services, trading platforms, research tools and stock market information. Investing has become more democratized. But dividend reinvestment has remained stubbornly restrictive and virtually unchanged. Until now, it essentially followed a one-size-fits-all approach.
You can sum up traditional DRIPs this way: Dividends generated by a stock or exchange-traded fund (ETF) are reinvested back into that same stock or ETF. Even if that didn’t make sense for your portfolio, that has been the primary – and often, the only – choice for commission-free dividend reinvestment.
So we took our time, picked the brains of many of our clients, tested our ideas, dropped a few ideas, added some others and came up with the Flexible Reinvestment Program™ or FRIP™. It’s a truly unique program that puts you in control of commission-free dividend reinvestment.
Because it’s new, the reinvestment program might appear complex, but it really has just two primary components. Dividends from securities that you own flow into a collective pool. You then decide which eligible* securities (which includes most stocks and ETFs) you want to buy from the dividend pool.
Beyond the flexibility to pick the securities you want to invest in – and change your selections at any time – FRIP’s power rests with the dividend pool. No, you can’t buy fractional shares, as you can with some DRIP programs. Instead, you can tap into the pool, which swells from the accumulated dividends of your entire investment portfolio. If you want, you can invest hundreds of dollars in a single stock from dividends paid out by five, 10, 20 or more securities that you own.
I would encourage you to review FRIP™ educational articles that outline the program in more detail. After spending a long time considering dividend reinvestment, we’re confident we’ve offered a program that is fueled by your imagination and guided by your investment strategy.
How might you use FRIPTM to reinvest dividends?
Also of Interest:
Justin Gioia has been with Scottrade since 2011. He manages Scottrade’s investor client experience.
*Marginable equities are eligible with the Program Balance, as defined in the Flexible Reinvestment Program™ Terms and Conditions.