Bank dividend reinvestment plans: The revival?

Dividend reinvesting plans could soon be back in favour. We weigh the pros and cons.

Summary: Australia’s big banks could place more emphasis on dividend reinvestment plans in the future in order to manage their capital position. This allows investors to take advantage of compound interest. But the downside is a lack of control, meaning investors could miss out on opportunities to spend dividends on cheap stocks during market downturns.

Key take out: Dividend reinvestment plans have their uses and banks may soon start discounting again, but organised investors can be just as efficient with dividend income outside the programs.

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