Reinvest dividend in more shares?
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steviebuk
Posts: 146 Forumite
I only have 127 BP shares, bought when they had their oil spill issue. Every dividend they ask would I rather reinvest them in more shares. I looked this up and some says its not always a great idea. However, my dividend is only ever about £9 each time. So I assume it would be better to just reinvest?
Reading up on this it looks like it ended up costing Shell a lot of money as more people did it. But then people made money from the share buy back?
Reading up on this it looks like it ended up costing Shell a lot of money as more people did it. But then people made money from the share buy back?
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If BP themselves offer a dividend reinvestment program with no minimum, or scrip dividends system, which is free for you to opt in to use, you might as well use it to invest your £9-a-time back into the company hoping for long term returns. Presumably that's why you hold the 127 shares, so why not have another one or two? If you don't think the company's share price represents good value any more (as they're no longer in the middle of the oil spill uncertainty which they had when you bought them), you could always just sell those other 127 shares and put it into an investment fund that spreads your money over a much bigger range of companies.
With the share price being 5-6 quid, your £9 div would only buy you one-and-a-bit shares and as they can't issue you fractional shares you may get a few pounds left over - so you still have an annoyingly small cheque to bank.
The above assumes it's free to reinvest. If actually it's just your broker offering to reinvest the money they received to buy you new shares on the market, at a discounted rate, I probably wouldn't bother unless the fee is no more than a percent or two of the amount being invested. If they want to charge you £1-2 to invest the £6 to buy one share and give you back £3 change from your £9 dividends, that would be a huge percentage and no point doing it really.0 -
Thanks. It's something BP offer me when I sign into my account. Maybe I could do the investment fund idea, might be better long term.
The original purchase of the shares was because I've always wanted to own some. Didn't really understand what I was doing but thought BP shares can't go down any further than they were at that time so bought £500 worth. It was £500 I was prepared to loose. And I was aware that, in fact, they could of tanked and become worthless but I was betting they wouldn't.
I was going to sell them recently but then thought why not just hold onto them. But maybe putting them in an investment account might be a better option.0 -
Depends if you are using a platform which charges you a fee to buy shares with it.0
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We had this with, I think, BT some years ago after they were first privatised. The way it worked then was that they bought the one or two whole shares from the dividend, and money left over was held until the next time, and added on to the next dividend.
Over years this did increase the number of shares held, therefore increasing the amount of dividend available to buy shares, increasing the number of shares.......0 -
We had this with, I think, BT some years ago after they were first privatised. The way it worked then was that they bought the one or two whole shares from the dividend, and money left over was held until the next time, and added on to the next dividend.
Over years this did increase the number of shares held, therefore increasing the amount of dividend available to buy shares, increasing the number of shares.......
... the price of which have been falling far faster than the dividend, whittling your money away at an impressive rate and making the holding of them pointless.
On which point, getting back to the OPs question, at some stage BP shares will start to hit the same phenomenon as electric transport cuts into petrol and diesel sales. It might be 5-10 years off but the price will drop earlier than that.0 -
Reinvestment of dividends is usually a good thing but it's time to sell this punt and diversify into a fund or trust.0
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Yes, but its always best not to just fall in love with any share, but re-evaluate whether there is still a case for keeping it - which we decided there wasn't some years after the privatisation, and before the GFC.the price of which have been falling far faster than the dividend, whittling your money away at an impressive rate and making the holding of them pointless.0 -
AnotherJoe wrote: »On which point, getting back to the OPs question, at some stage BP shares will start to hit the same phenomenon as electric transport cuts into petrol and diesel sales. It might be 5-10 years off but the price will drop earlier than that.
I was thinking that but the likes of Shell have seen this, I think it's Shell, and are now investing heavily in electric so BP might do the same.
However, I'm not attached to them, I'll probably thinking about selling them soon.0 -
I was thinking that but the likes of Shell have seen this, I think it's Shell, and are now investing heavily in electric so BP might do the same.
However, I'm not attached to them, I'll probably thinking about selling them soon.
If you believe that the future is "clean" energy then rather than buying an oil company that plans to get into clean energy, why not buy something like Greencare or The Renewable Infrastructure Group, which has already built up and commercialised assets in this area and is paying a respectable annual dividend?0 -
Always reinvest your dividends - warren buffet.0
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