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A Dividend Portfolio For Transaction-Free Investing

Jun. 11, 2019 10:17 AM ETARI, CSCO, TGT, QCOM, AVGO, T, BNS, CVS, LAND, IDV, OHI, BNS:CA36 Comments
Douglass Gaking profile picture
Douglass Gaking


  • Transaction-free trading platforms can be a powerful tool for compounding dividend returns.
  • Concentrating on undervalued stocks that pay high dividend yields and growing dividends can reap high returns.
  • Straying into investments that are difficult to understand for the sake of diversification can be a drag on returns.

In the beginning of 2017, I set out to create a total return portfolio for my long-term savings. At that time, I had learned through self-study about value investing, high-yield dividend investing, and dividend growth investing. Seeking Alpha was a wonderful inspiration, as was Get Rich with Dividends by Marc Lichtenfeld and the wisdom of Warren Buffett.

What Seeking Alpha authors helped me realize is that dividend investing can be about much more than income. It is a powerful mechanism for compounding wealth. As Lichtenfeld emphasizes, a dividend reinvestment plan (DRIP) earns a higher return when there are dips in the stock price because dividends are reinvested at a cheaper price. An attractive element of DRIPs is the ability to add more shares in small amounts without paying transaction fees.

Transaction-free investing services were just starting to take hold at the time. They have their drawbacks, but they have their advantages too. They may not offer retirement accounts, but as a teacher, I am not in a high income bracket, so the impact of investing in a taxable account is very small. DRIPs may not be available, but they are not terribly important when one can by shares transaction-free, other than potentially missing out on some microshare ownership. Depending on what investing strategy you use, it can be cheaper to use a taxable transaction-free trading account than a tax-protected account with fees, especially if you are in a lower income tax bracket.

The transaction-free structure became an important part of my dividend portfolio strategy. The opportunity cost of a DRIP is what else I could do with my dividends. With transaction-free trading, I would not have to reinvest each dividend in the stock that paid it if I felt I could invest it at a better value elsewhere. This became the thesis of the

This article was written by

Douglass Gaking profile picture
I am a teacher and individual investor. I teach personal financial responsibility and entrepreneurship to high school students.M.B.A. in Economics, Southern New Hampshire University

Analyst’s Disclosure: I am/we are long ARI, BHR, BNS, CLDT, CNO, CSCO, CVS, GHII, GMLP, IDV, JPS, LAND, MYI, QCOM, T, TGT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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