How to track a dividend reinvestment plan
As explained by Investopedia: “A dividend reinvestment plan (DRIP or DRP) is a plan offered by a corporation that allows investors to reinvest their cash dividends by purchasing additional shares or fractional shares on the dividend payment date”. While deciding whether or not to proceed with a dividend reinvestment plan might be a straight-forward decision for most investors, the reality is that if they do proceed with the DRP, tracking all those reinvested dividends and properly calculating performance can be a nightmare. As stated by a long-time Sharesight client Mike Deam:
One of the issues with DRPs is the paperwork it creates. If you hold a share and reinvest it for 10 years at 2 DRPs a year, you end up with over 20 acquisition events to manage. Add to that issues, bonus issues, share top-up plans… well you get the picture.
The good news is that Sharesight takes the hassle out of tracking dividend reinvestment plans. Our DRP feature lets you track a dividend reinvestment plan by activating a DRP for a particular holding and automatically tracks the reinvested dividends for you. Alternatively, you may manually reinvest a specific dividend, at the correct reinvestment price.
Here’s how to track a dividend reinvestment plan
If the holding is ASX or NZX listed, you may activate the Auto Dividend Reinvestment feature, which will automatically track a dividend reinvestment plan by reinvesting all dividends. Otherwise, you may choose to manually record a dividend reinvestment when you add or edit a dividend payment. Either way, when a dividend reinvestment is recorded, a dividend reinvestment trade for the new shares is recorded in your portfolio, in addition to the dividend record.
Note that Sharesight does not account for rounding where the share DRP account acts like a bank with a carry-over balance, or where discounts are given on the price. You would need to manually review and adjust the dividends in those cases.
UPDATE: It’s now easier to track DRP residual balances.
However on the whole, Sharesight greatly eliminates the headaches associated with traditional record-keeping by automatically tracking most DRPs (not to mention other corporate actions, and trades). Furthermore, Sharesight also lets you attach official dividend statements to dividend records within your Sharesight portfolio. Here’s a handy tip if you don’t have electronic copies of your dividend statements:
Sharesight is particularly helpful because it lets me store the dividend statements with each dividend. If you don’t have an electronic copies of your statements, and don’t have a scanner handy, then try the TurboScan smartphone app.
Please note that automatic DRP tracking is only available for ASX or NZX listed companies that have offered a dividend reinvestment plan and for which we have the DRP data available.