I have been a big supporter of dividend reinvestment for a very long time, and always look forward to reading what some of the other people on this site write about it .
Some of the factors that make dividend reinvestment successful, we are pretty familiar with already . This includes history of dividend increases, cash-rich companies, and companies that produce things that we eat, drink, and smoke to name just a few.
However, assuming that one is not dollar cost averaging on a individual or group of stocks on a regular basis, one overlooked factor may be timing of the purchase .
After the long bull market ended in 2000, we have seen two bear markets along with stellar 2003 and 2009 years that some people believe that all one needed to do was throw a dart and money was made.
Because of the wild market swings that have taken place this past decade, the days of simply making a one time purchase and "turning on the dividend reinvestment faucet" may have ended for the foreseeable future.
As great as some of the "dividend aristocrats" have done in raising dividends for a number of years, the lump sum date of purchase has much to do with the performance of the strategy . After all, dividends can only provide somewhat of a cushion during nasty market corrections like we witnessed last decade .
Over the next few weeks, I will present a series of examples to show how important this sometimes overlooked piece of timing the purchase can make a huge difference in ones investment results.