Just a question about DRIPS

[Blonde Granny]

I know what they are, and I somewhat know how they work. Frankly I was surprised tonight when I logged onto my Ameritrade account that the little guy named Ted popped up and his comments were about drips. I thought they had gone the same place other obsolete things.

Anyway, it got me thinking. We have some REIT preferreds that are paying fairly good dividends/interest whatever you want to call it. But first: We're retired and have been for 19 years. DH is 70 and I'm still a youngster at 69. We're fairly conservative in our investments, and primarily we live on our SS and VA disability. If we need more, we take it from our cash accounts, but that seldom happens. House has no mortgage, we own 2 Mercedes, 1 paid for, 1 has a $10K loan because I didn't want to take the money to pay for it. We both have Medicare and a Plan F supplement, plus DH is 80% disabled according to the VA and we have another claim in now asking for additional disability (probably won't get it, but who knows, could happen).

We do not need any money from investments to live on.

So, would there be any advantage to allowing these quarterly payments to be in a drip program rather than piling some money up in the MM acct until we then find another investment then start the process all over again? I love CDs just for that reason, it's nice to see the money compound and over time there used to be some good gains.

[Deleted]

Yes actually.

While you don't need "extra" money to live on, D.R.I.P.S. allow for Factional shares to accumulate in a position; and it all benefits from the Dividends payable.

So if say you started with 100 shares and they were trading at $15 per share: The dividend was say $0.28 per share; with a D.R.I.P., on the payable date You would see 101.866 shares of the Stock in the position.

The next time the Dividend was payable it would be payable on the 101.866 shares.

The really neat thing about D.R.I.P.S is that you get "extra" shares with no TRADE FEE. The D.R.I.P. doesn't cost you a cent.

So all your Dividend go right to work for you.

The only downside is that if the Market/Security falls so does the value of the Stock; BUT, that just means that (as long as the Dividend holds) you get more "extra" shares..

Personally I don't believe that D.R.I.P.S. are obsolete, or without merit: rather I think folks just don't really understand the worth and concept behind them. Then again, a lot of folks aren't looking at Investing as a Long Term endeavor but rather as a A.T.M. .

Also, remember if you start a D.R.I.P. You can always change back to a "Cash In Pocket" just by giving the brokerage a call and saying "Hey I have so & so on D.R.I.P.; I want to take it off of that so I get the Dividends in cash."

Not going to go off and talk about compounding interest; as I know you are seasoned enough to have learned that lesson well. Just will say this the same lessons for compounding interest & what it does apply to D.R.I.P.S .

[Blonde Granny]

Thank you! I think I'll contact ameritrade to see if these preferred are in that category.

[Blonde Granny]

Thanks DI. I emalied our contact at Ameritrade this AM. All but 1 of our Preferreds offered the DRIP option. I excluded one more but went ahead and changed the balance of them  over to the program. Had no idea that option was still available.

[Deleted]

No Problem. With all the changes that keep getting made to all sots of things some of the more interesting and beneficial things get kind of get lost under the rug; D.R.I.P.s are one of those things.