Now, I’m diversifying my DRIP strategy to accomodate some of the criticisms/points raised above. I keep some companies fully reinvested; but others I’m taking the divs in cash now so that I can reinvest where I want, when I want.

the bigger advantage imo however in this debate is the savings you get from trading commissions. for me, i havta pay out $29 each time i make a purchase/sell. to me… i eat that as a ‘service charge/mer’ and ignore it from my unit cost calculations.

Rookie: You bet. Dividends are taxable in the year in which they are received.

What I meant to say was if an investor CAN’T spot value very well, he wouldn’t have been a stock picker the first place, and we wouldn’t be discussing the merits of DRIP. If you’re considering DRIP, then you’re a stock picker, and you “should” know how to spot value and deploy your dividends accordingly.

The above is not applicable in a RRSP account, but since no “true” DRIP exists registered it doesn’t really matter anyway.

My views on DRIPping are generally positive, as yours seem to be. The good things about them are that it’s a sort of forced-savings program (portfolio increases in time with no effort on my part) and I save on brokerage fees (always important, especially with smaller portfolios). When you get a discount on the share price (as I do with my REIT, AX.UN) so much the better. Even if the stock flatlines I’m making 10% a year when you combine the payout and the purchase discount.

The bad? At any given time, you may be investing in a fully valued or even overvalued security. When that happens you’d technically be better off buying a different stock at a bargain price and holding off on your dividend-payer for a while. You may also be getting overweight in one company or sector if you’re quietly accumulating one company’s well-performing shares.

But in my experience, that’s a wash over the long term. Like you said, most investors aren’t great valuators. I’d rather look back in 30 years and accept that I occasionally paid full price for my BMO shares, than look back at a host of value traps I plowed by BMO dividends into because I was “sure they are going to come back.”

Side note, the rumour is Computershare, the Trustee/transfer agent for many Cdn. corps is going to try and setup a similar system that they do in the States which would be a vast improvement over the current statement and cheque method.