How to Reinvest Dividends on Fidelity
Investing in dividend-paying stocks can be a great way to generate passive income. When you invest in companies that regularly distribute dividends, you have the option to reinvest those dividends back into the same stock, allowing your investment to grow even further. Fidelity Investments, one of the leading investment platforms, provides a seamless and user-friendly process for reinvesting dividends. In this article, we will guide you through the steps of reinvesting dividends on Fidelity and answer some frequently asked questions to help you make the most of this feature.
Step 1: Open a Fidelity account
If you do not already have a Fidelity account, you will need to open one. Visit Fidelity’s website and follow the instructions to open an individual brokerage account or any other account that suits your needs.
Step 2: Choose dividend reinvestment
Once your account is set up, log in to your Fidelity account using your username and password. Navigate to the account where you hold the stock you want to reinvest dividends from. Click on the “Account Features” tab, and then select “Dividends & Capital Gains” from the dropdown menu.
Step 3: Select the stock
In the “Dividends & Capital Gains” section, you will see a list of the stocks you own. Locate the stock you wish to reinvest dividends from and click on the “Dividend Reinvestment Plan” option next to it.
Step 4: Set your preferences
Now, you have the option to choose how you want your dividends to be reinvested. You can select to reinvest all dividends automatically, set a specific dollar amount to be reinvested, or choose to have dividends paid out in cash. Select the “Automatic” option if you want to reinvest all dividends automatically.
Step 5: Complete the process
After setting your preferences, review the information provided and click on the “Save” or “Submit” button to complete the process. Fidelity will now reinvest your dividends automatically according to the preferences you have set.
Frequently Asked Questions (FAQs):
1. What is dividend reinvestment?
Dividend reinvestment is the process of automatically using the dividends received from a stock to purchase additional shares of the same stock.
2. Can I reinvest dividends for all stocks on Fidelity?
Not all stocks offer dividend reinvestment plans (DRIPs). However, most large-cap stocks and many other dividend-paying stocks do offer this option.
3. Are there any fees for dividend reinvestment on Fidelity?
Fidelity does not charge any fees for dividend reinvestment. However, it is always a good idea to review the terms and conditions of your specific account.
4. Can I choose to reinvest dividends partially?
Yes, you have the option to set a specific dollar amount to be reinvested from your dividends. This allows you to partially reinvest while keeping some cash.
5. How often are dividends reinvested on Fidelity?
Dividends are typically reinvested on the payment date, which is usually quarterly. The exact timing may vary depending on the stock and the company’s dividend distribution schedule.
6. Can I change my dividend reinvestment preferences later?
Yes, you can change your preferences at any time by following the same steps outlined earlier. Simply log in to your Fidelity account, navigate to the “Dividends & Capital Gains” section, and adjust your settings accordingly.
7. What happens if I sell my shares after choosing dividend reinvestment?
If you sell your shares, the dividend reinvestment feature will be automatically turned off for that specific stock. You will receive any future dividends as cash instead.
8. Can I reinvest dividends from mutual funds on Fidelity?
Yes, you can also reinvest dividends from mutual funds on Fidelity. The process is similar to reinvesting dividends from stocks.
9. Can I reinvest dividends from multiple stocks at once?
Yes, you can set dividend reinvestment preferences for multiple stocks in your Fidelity account.
10. Do I need to have a minimum number of shares to reinvest dividends?
No, there is no minimum number of shares required to reinvest dividends on Fidelity. You can reinvest dividends regardless of the number of shares you own.
11. Can I reinvest dividends in a different stock on Fidelity?
Yes, you have the option to reinvest dividends in a different stock if you choose to do so. However, this feature may not be available for all stocks.
12. Can I reinvest dividends in an IRA or other retirement accounts on Fidelity?
Yes, you can reinvest dividends in an IRA or other retirement accounts on Fidelity. The process is the same as reinvesting dividends in a regular brokerage account.
Reinvesting dividends can be a powerful strategy to compound your returns over time. By following the steps outlined above, you can easily set up dividend reinvestment for your Fidelity account and make the most of your investments. Remember to review your preferences periodically to ensure they align with your investment goals.