Amy Arnott, portfolio strategist for Morningstar Inc., discusses how a popular dividend investing strategy works, and who would or wouldn’t benefit from it.
On this episode:
- Let’s focus on when dividend reinvesting works as a strategy and when it does not. Who should consider reinvesting dividends?
- When shouldn’t an investor reinvest their dividends?
- Are there any differences between reinvesting dividends in a taxable vs a tax-deferred account?
- What types of dividends are taxable and non-taxable?
This part of the episode includes a correction: A response about which dividends are taxable versus nontaxable should have said, “If you're in a bond fund, most dividends would be taxable unless you’re investing in Treasury bonds, which would normally be exempt from state and local taxes.” We incorrectly said federal taxes.
- How long you’ve owned a dividend-paying stock matters when it comes to taxes. Can you explain the differences between qualified and non-qualified dividends?
- What kind of record-keeping does reinvesting dividends require, and how does reinvestment affect the cost-basis?
- How are considerations different for stock dividends vs fund dividends?
- What’s the final takeaway for the audience about dividend reinvestment?
Read about topics from this episode.
When to Reinvest Dividends (or Not)
These 4 Dividend ETFs Strike the Right Balance for Income Investors
10 Top Dividend Stocks for 2025
13 Elite Companies With Fast-Growing Dividends
What Makes a Great Dividend Fund?
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