DRPs - the money or the shares
DRPs - the money or the shares? Businesses that generate free cash flow, or those that eventually will, are what every investor should seek. The problem is that not all shareholders need the cash (dividends) coming out. Dividends landing in your bank account create the problem of what to do with the cash. Financial markets being what they are, there's a solution to the problem (isn't capitalism wonderful?). It's called a 'dividend reinvestment plan' or DRP for short. So are they worth it? The answer is more complex than it might appear. One of the golden rules of investing is 'never, ever buy a stock unless it's underpriced'. This includes shares bought under DRPs; so if you can find underpriced stocks with DRPs, then by all means participate. Just remember to cancel your election when the stock's no longer obviously underpriced and there are better opportunities for new investments. (VIEW LINK)
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