Scottrade Flexible Reinvestment Program (FRIP)

I have heard of dividend reinvestment for quite some time, but only in a recent month that I found out how to take advantage of this feature in my investment account. I am excited about it and like to share this neat feature that is available for free.

My first investment account was a Roth IRA account, which I took advantage of in my mid-20s. That is the time when most of us have very little money so don't even mention about saving. Wrong! I saved, but not a whole lot, just a little pie of my paycheck. If you asked me why Roth IRA, my answer to you is I don't know. I just knew that I had to start with some account and Roth IRA was very attractive to me at that time due to no taxes on gains and losses. (Thinking that gains will supersede losses).

Anyway, let's get back into dividend reinvestment. The way dividend reinvestment works is that you buy 1 share of ABC company and ABC pays you a dividend of .25 each quarter. In one year, you would have $1. Normally, the dividend payout would go straight to your account so if you opt in for dividend reinvestment, that .25 dividend you received could be used to buy 1 additional share of ABC stock (assuming ABC price at .25 each share) instead of parking in the account making very minimal interest. In one year, you would have 4 additional shares of ABC stock and hence, your dividends add up year over year.

Dividend reinvestment feature in Scottrade's account is the Flexible Reinvestment Program (FRIP). You do need to opt in for the feature to work to your advantage.



Once you opt in, it should bring you to a page like this:



In the above account, you will see two paying dividend equities. All dividend paying stocks you owned will be listed there and you have an option to yes/no the dividend payout. If you select yes, what it does is each time VEA or VOO pays dividend, the dividend would get pull into the FRIP account.

Once the FRIP account accumulated enough to buy at least one share of any stock you choose, then it will buy the stock at the date you selected with no commission.

Something cool to consider in your own investment account.