Originally published on Blossom on March 21th, 2024 Please find retrospective commentary at the end. DRIP is where you buy a stock and its quarterly dividend, instead of crediting cash into your account, automatically buys more shares of the stock. Over TIME, it juices the return of that stock investment. Sounds great, right? Maybe if youâre lazy or you donât like tracking your investments - but youâre not⌠The conventionalists will have you believe this is a prudent thing to do. Why? There is nothing other than laziness that suggests you do this. Whoever told you.....do they get fees from such available DRIP investments? (I know not all stocks, ETFs have DRIP options - which is red flag #1). Or are those that tell you just repeating what theyâve been told because on the surface it sounds acceptable? A kind of sophisticated laziness? Letâs look into why DRIP is not a plan for us. First, you receive dividends monthly, quarterly, or annually, but most stocks, itâs quarterly. It is never true (thatâs right, I said NEVER), that buying your DRIP stock at the TIME you receive a dividend is always a good TIME to buy that stock. You may have read KTS #2 âFollow the Sectorâ post from the other day that can give you some insight on this. A popular DRIP stock in the U.S. is $WBA , Walgreenâs pharmacy. Pull up a 10-year chart and imagine DRIPPING your quarterly dividends into that stock as it steadily dropped from $100 to $20 today. What a waste of dividends. Averaging is Dilution. You have a rationale, you do your homework, you make decisions at points in TIME to establish a position in a stock. So why then would you be willing to forgo your access to your quarterly cash reward and buy something that is currently overvalued? That makes zero sense - and donât let the conventionalists tell you otherwise. Follow your current knowledge of the market and take that cask kick back and buy shares of a stock that has a likelihood to rise rather than fall. Test it out for yourself to convince yourself that thereâs always a better place to invest than your current DRIP stock. So put it there instead if your objective is to grow your nest egg. I donât want to lose the point that itâs fine to have a core holding that you plan to hold for a lifeTIME even when itâs not in favor or it hits a rough patch in business (see $TSLA ). But when companies are in periods of declining profits, smarten up and donât take that monthly cash reward and try to catch a falling knife. SomeTIMEs when you receive your dividend, buying more of the stock that gave it to you IS THE BEST place to put it. But the point is, not always. The pros know you can read cycles, markets, fundamentals (company earnings, debt, fcf, etc.), and technicals (charts). Ignore those that say you canât..........and I promise you the pros arenât in any kind of DRIP! Next TIME you get your dividend, ask yourself this question, âIf you were given $10,000 right now but had to put it into one stock, which would it be?â Then do that with your (much smaller) dividend instead. You're not lazy when it comes to investing so stop diluting your performance and check out my previous post on âFollow the Sectorâ to learn how to better redirect your dividends in a systematic, profitable way. It's too easy to just throw your hands up and say ânobody knowsâ But you can be a much smarter investor - reach for your full potential! Best of luck! Retrospective Commentary â September 9th, 2026 No need for much retrospective comments on this one â it is what it is. Side note: Walgreenâs pharmacy ($WBA ) is no longer publicly traded. You can find several examples everywhere underscoring why DRIP is a flawed Conventionalist tactic (e.g. - Alexandria Real Estate Equities ($ARE ), etc.).Â
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13 Comments
Not Financial Advice @anpc86 ¡ 17h
Sophisticated laziness ⌠that really hits the nail on the head
Jesse Franklin@pinnaclewealth ¡ 18h
Correct may not always make sense and dividends are not guaranteed. Have make sure the distribution yield is sustainable, company has growth and not a yield trap
Carlos @dividendcarlito ¡ 21h
Made this point a hundred times "Investors should prioritize companies with effective capital allocation strategies that reinvest wisely while rewarding shareholders when feasible. By leveraging dividends in this manner, investment returns can be significantly enhanced and yield greater compounded returns." https://divistockchronicles.substack.com/p/how-to-use-dividends-like-warren
Abby G@abbyg ¡ 17h
Food for thought đ¤
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