Another case for DRIPping

I went back and set up a screen to choose a small handful of stocks with a tight enough set of criteria that only 28 made the list. The main items were that they had a 5% dividend yield or higher and a few other price, volume minimums. I did look for stocks that had their 50SMA higher than their 200SMA and the price had to be above the 200SMA. These were really just to get a small list rather than looking specifically for any performance, I could have just as easily reversed the technical items and and come up with a list that worked just as well.

A good number of the candidates were of the AAPL, BIP and D variety, trending up since early 2009 but some were not. I chose the very first one that bucked the trend and that had over three years of history... Exelon Corp (EXC).

Here is the chart:

Using the same $1,000 per quarter investment and just going with buying based on the last trading day of the month before the record date, the vertical green lines.

If there were no dividend this would be not so great, total ROI is in the red by 3.25%, which is better than it was in 2010 but the timing of when I might need my money might correspond with a down time, and that would suck. This is the main issue that I initially had with DRIPs.

With dividends included and re-investment applied as per the DRIP, the results are as follows:


Adjusted Cost Base (ACB) = $42.44
Total invested  = $12,000 (302 shares)
Current price = $41.11
Total value = $12,431
Total gains (on paper) = $431or 3.6%
Final dividend payout = $145.04

Dividend Re-Investment Plans are for long term investing with no real eye toward selling. As much as this goes against my desire to continue with an active trading plan, I definitely see the advantage in this lethargic style of investing. The only investments that I have right now are of this type, which says a lot for DRIPs in the first place. It was the first investment strategy that I investigated and, while it may not be the last, it certainly will stand the test of longevity in my books as i don;t plan on closing out my DRIPs. In hindsight I do see that I could have benefited by shutting down my trading at it's peak and shifted my cash into these instead. Of course, the peak is not always attained in any trade or plan, hindsight as it is.

Being that I am in Canada, I suppose that I should do this same study with Canadian stocks, or at least those that have a Canadian stock offering. The tax implications are easier to handle as is the acquisition of the starter stocks for the DRIP... which I haven't even mentioned here. There just aren't as many offerings in Canada as in the US.

Jeff.