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The benefits of reinvesting dividends
In the current economic climate, it is understandable that some savers will prefer to have cash in their pocket instead of setting it aside for the future. However, according to research by Equiniti, over two-thirds (67 percent) of investors are likely to reinvest their share dividends.
Employing such a long-term strategy is a good way to build up a nest egg for the future in more ways than one. Not only will those who chose not to reinvest lose the income from potential returns on their extra shares, but they will also be hit by the extra whammy of the recent increase in VAT.
In fact, with the FTSE 100 rising over the last year, anyone who reinvested dividends in the index would have received a welcome further return of nine percent.
Looking at the regional picture, savers in Wales and Scotland are more likely to reinvest dividends, while those in the Midlands and Northern Ireland would take the cash.
Additionally, while investors have shares, on average, in five companies, those in Northern Ireland and London are more likely to have a diverse portfolio with 6.2 and 5.8 stocks respectively. This approach is key when it comes to managing risk by spreading any investment across more companies.
