Intro

This chapter examines the role of dividend reinvestment in investment portfolios, highlighting its potential benefits for long-term growth. It also discusses when it may be more advantageous to take dividends as cash, urging investors to align their strategies with personal financial goals.

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Transcript

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Transcript

Episode notes

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?

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10 Top Dividend Stocks for 2025

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What Are Dividends?

The 10 Best Dividend Stocks

The Best Dividend Funds

What Makes a Great Dividend Fund?

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