AJ Bell Youinvest Dividend Reinvestment Programme 3

When it comes to buying shares online, there are a number of brokerage platforms you can chose from. Each has there own merits and there are enough online platforms going around to cater for your own individual needs.

One of the platforms I like is AJ Bell Youinvest. With an easy to use interface and low annual custody charges, Youinvest is great for investors who want to stick to a buy and hold or passive approach to investing. If on the other hand you want to regularly buy and sell shares (trading), there are far better platforms out there.

One of the downfalls Youinvest has is that it does not currently have a dividend reinvestment programme. This makes it really difficult for an investor wanting to continue building a position in a particular stock without adding fresh cash. I’m not going to debate the merits and drawbacks of dividend reinvesting here as they are countless articles already on the internet.

For those interested in dividend re-investing, I have good news for you. I have it on good authority that Youinvest will be starting a dividend reinvestment programme in the near future.

How much doe Youinvest charge for the dividend reinvestment programme?

Although Youinvest have not yet officially announced the dividend reinvestment programme, the unofficial line currently is that their will be a charge of 1% of the amount reinvested with a minimum of £1.50 and a maximum of £9.95

This seems to be in line with what the other big online brokerage houses are offering so it seems to be a fair deal.

Should you use a dividend reinvestment programme

When deciding whether to use the dividend reinvestment programme, you should look at costs in relation to the amount you want to re-invest. Another factor you need to look at is whether you want to escalate your commitment to a certain companies shares, whether you want to increase your position size.

Looking at my own personal situation, I do not currently use a dividend reinvestment plan. This is because the maximum dividend I receive in one batch is not sufficient when taking costs into consideration. I currently receive £360 a year in Shell (RDSB) dividends. These are paid quarterly so I will get £90 per quarter or in one batch. With a minimum charge of £1.50, re-investing £90 will have a ‘dealing charge’ of 1.6%. If you have learnt anything from this blog, you will know that this is too much. High charges dilute your performance returns over time.

So when is it right to consider dividend re-investment? From my perspective, it is when costs are a maximum of 1% of the reinvested amount. That means re-investing a minimum of £150 in one go. So until I do not receive £150 worth of dividends as a single amount, I will not consider the dividend reinvestment option.