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Add A Faucet To Your DRIP  September 15, 2013 – 04:21 am

Over the past two years, I've become a more aggressive income investor. Though my overall strategy is one of total return, I've developed an affinity for researching and adding stocks to my portfolio that have an income component. For the past 15 years, I always took dividends in cash and redeployed as circumstances dictated. Just this past week, however, I enrolled some of my positions in a DRIP program through my online broker. Though the decision was partially meant to take advantage of the convenience and free position building capability that a DRIP affords, my primary goal was more of strategic move where I won't be "setting it and forgetting it."

My DRIP Faucet

I anticipate that I will turn my DRIPs on and off like a faucet as market and stock specific conditions dictate. Initially I have turned the DRIP faucet on for seven securities that pay me dividends on a monthly basis. I consider all these positions fairly or undervalued in the market - namely American Realty (ARCP), Whitestone (WSR), Prospect Capital (PSEC), Alpine Global Property (AWP), Western Asset High Yield (HYI), Eaton Vance Global TM (EXG), and Eaton Vance TM BW (ETV). Monthly dividend payers are ideal compounding vehicles compared to quarterly or less frequent payers in my view.

The following chart specifies the loose criteria that I will use to manage these DRIPs. As long as the securities remain fair- to undervalued, the faucet remains in the "ON" position. If the security appreciates beyond stated parameters, it will be reviewed and the DRIP faucet will likely turned "OFF." If the security moves significantly beyond parameters, an outright sale of the position might be considered.

Source: seekingalpha.com

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Here's my take

I was thinking DRIPs were right for us, because we don't have a large chunk of money to invest but we do have x amount every month that we would like to start investing. but i wanted to be diversified, and didn't want to be burdened with setting up DRIP accounts with a bunch of different companies. so, what i decided, after looking at a bunch of different options, was to open a sharebuilder acco...o monthly fee, but costs $4 per purchase. in that case the cost is only 2% if you are investing $200. but each month you would only be investing in 1 stock. but you could change that stock each month, or keep it the same for a while until you built up your holding. anyway, it's not for everyone, but it's worth checking out and i do think it's a good idea for some people depending on their goals.

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