Keep the Dividends Flowing: Screening for DRPs
by Wayne A. Thorp
Dividend-paying stocks are usually classified as conservative stocks, at least compared to highly volatile growth stocks. Dividend income provides a steady source of return, and no longer suffers from a tax rate disadvantage.
Also, investing in companies with dividend reinvestment plans (DRPs) offers a conservative low-cost approach, since dividend payments are put to work immediately with little or no transaction costs involved. [For more on the basics of DRPs, see our annual guide.]
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However, selecting stocks from a universe that consists only of conservative stocksfirms offering dividend reinvestment plansis not a conservative approach, and can quickly land you into trouble.
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