2014 IRA contributions limits remain at $5,500
IRAs are a great place to park funds because dividends (and the occasional capital gain) grow tax free. I prefer the ROTH variant because I plan to access funds prior to age 59.5. The main advantage is that past contributions can be withdrawn anytime without penalty in a ROTH (not so with a traditional IRA). I have been thinking about pursuing part time work as little as 4-5 years from now if I can build my passive income to around $1,000/month. Life is not about working for money! I regularly day dream about moving to the beaches of Thailand or being a full time ski bum. Perhaps "work" as a ski instructor would be suitable! Anyways that's why I choose a ROTH.
I really like Scottrade's FRIP program and I plan to take advantage of it. My Scottrade account is still young and I do not have a sizable income stream in place yet. In fact tomorrow's payment from TGT will be the first dividend to ever hit this account. However I am directing all new taxable deposits and all taxable dividends from my Fidelity account over to Scottrade. It will grow over time and FRIP is going to be the vehicle for reinvestment. Two examples demonstrating how I'll use FRIP:
#1: I am currently happy with the size of my KMI position and am not interested in buying another $1,500 chunk of this company all at once. There's no incentive to DRIP KMI since it doesn't offer a discount. KMI is currently trading around $32-$33 and would be a great candidate for new money despite the fact it's already a large position for me. FRIP. I already have enough PM shares, but if it trades under $80 I want more. FRIP it. With FRIP (unlike DRIP) I can direct reinvestment to whatever offers the best value and since I'm only getting 1-2 shares at a time it won't screw up weightings.
#2: I haven't bought shares of General Mills or Abbot Labs going on 3 years. However I'm not interested in using $1,500 of new funds to purchase GIS over $50 or ABT over $37 which is where they currently trade. Unfortunately both those positions are smaller than I'd like them to be. How can I solve that problem? FRIP. I could use reinvestment to shore up under weight positions not suitable for new money 1-2 shares at a time. Great method to maintain portfolio balance while actually having a say over purchase price.
I see FRIP as a superior program over DRIP, although any applicable discounts unfortunately do not apply.
I turned on the OHI and BNS DRIPs in my Fidelity ROTH. Omega offers a 1% discount on dividend reinvestment, Scotia Bank 2%, I'll take it. At one point I planned to DRIP TD, but they discontinued their discount maybe a year ago. That is something I'll have to keep an eye on with Omega and BNS. It can change over time.
TD set to split shares 2:1 next month, announces third 2013 dividend raise
Investors don't really gain anything from a stock split. However I do not want my companies pulling a Google on me. Google currently trades at $1,078. How am I supposed to invest $1,750 into something priced that high like I recently did with LEG? Stock splits alleviate this problem. They are also good for options in case I ever decide to start selling covered calls.
I'm pretty sure the American shares of TD will split just like the Canadian shares. I ought to look this up though. Toronto-Dominion will be 4th company I hold to split its share price. The others being KO (2:1), SBSI (21:20 twice), and LO (3:1).
TD also announced a small dividend raise of $.01(Can $) per share. This particular raise was small, but completely unexpected. I wasn't anticipating a raise until next quarter, I hope it's still on the table.
Your vote counts
One of our privileges as stock owners is the right to vote in company matters. I voted "yes" to the Linn Energy BRY acquisition, and "yes" to the W.P. Carey CPA 16 acquisition. Make sure to voice your opinion in the companies you own and follow when it's time to vote! If you don't understand the issue at hand, consider siding with management's recommendation. Management are the stewards of our capital, if you own shares you have to trust them.