how do i reinvest dividends?

macmomo

I have about £4 000 in stocks and shares through First Direct online, outside an ISA. I get dividend payments into my bank account, small amounts £6-20. Is there an efficient way to have the payments automatically reinvested in the shares of the company that pays them rather than paid to me in cash? If not, how do I go about buying shares in that way in the future? many thanks

masonic

This is sometimes possible. Essentially, you get paid in shares rather than cash. I don't know if FD allow you to do this for the investments that you hold, but it should be easy enough to find out from them.

Loughton_Monkey

It is more a function of the specific share. Many companies give shareholders the right to have dividends paid as 'extra shares'. There is, however, always a small 'overs' amount because the dividend can only buy whole numbers of shares.

Any intermediary can also offer some sort of reinvestment service, but usually don't since the share dealing costs outweigh any advantages.

fozzeh

Loughton is right; some stocks have a DRIP (dividend re-investment plan) as an option on your dividend receival.

Bigger brokers may offer it as an option is the have enough customer to cut down on the purchase cost when bought as a bulk !!!-dividend. You'll probably be charged a nominal fee.

Or you get issued with sub shares, which can be converted or redeemed. Rolls Royce do a fairly common sub-share issue.

Biggles

Looks for companies that offer a scrip dividend. This will enable you to receive extra shares instead of the dividend, at no additional cost to yourself.

A DRIP scheme is similar, but does usually involve some costs, ie you will receive slightly fewer shares for the same dividend.

http://moneyterms.co.uk/scrip-dividend/