Quarterly dividend checks. Reinvest, or steer them somewhere?

I take the cash, and the reason is boring. When it lands in the account I actually look at it, and looking at it is how I noticed that one of my positions had cut its payout two quarters running. Automatic reinvestment would have hidden that from me because the share count kept going up either way. On the buildings side I have the same habit, I want to see the deposit, not a summary at year end.

Before you decide, read the actual reinvestment terms your broker uses, because "drip" covers two different mechanisms. Some plans buy on the open market in a batch at an averaged price, some are company-sponsored plans with their own schedule and occasionally a discount or a small fee. The prospectus or plan brochure says which.

The part that bit a friend of mine is lot tracking. Reinvestment creates a new tax lot every quarter, sometimes fractional, and if you ever want to sell part of a position and choose which lots go, you will be scrolling through 30 lines of $40 purchases. That is a bookkeeping preference rather than a return argument, but bookkeeping is where I lose weekends.

Reinvest everything. I know myself, and cash that sits in a settlement account gets spent on a roof or a plumber, not on the sleeve it was meant for.

@keystone that's the argument I keep landing on too, but doesn't it depend on whether your weights are still the ones you want? @canton is describing a position he'd sell if he were starting fresh. Feeding it quarterly seems like the worst of both, you neither hold your target weights nor exit.

One thing worth reading on your 1099-DIV when it shows up. REIT distributions get split into pieces, and part of a distribution can be classified as a return of capital, which isn't taxed as income in that year and instead reduces your cost basis in the shares. So the same $1,900 can produce a different bill depending on the mix, and the mix changes year to year at the same company. How any of that lands on your return is a licensed tax question and I'd put it to a preparer rather than the forum.

My point for @canton's actual decision is narrower. If a meaningful slice of your distributions is return of capital, your basis is drifting down while your share count drifts up, and automatic reinvestment makes that harder to follow later. I take cash on anything I might sell inside a few years and reinvest on the ones I intend to hold and forget.

@canton the case for holding cash for a few weeks is stronger right now than it usually is, because REIT prices move with rate expectations and they move fast. I've watched names in the same sector move several percent apart inside a month on nothing property-specific. If your plan is to add to industrial anyway, having four quarters of dividends in hand means you choose the day. If your plan is to hold everything forever, the day doesn't matter much and reinvesting saves you the effort. Which is it for you?

Scale changes this. My positions are small enough that a quarter's dividends come to about $70, which doesn't buy a meaningful piece of anything, so it just sits. Reinvestment at least puts it to work in fractional shares. At $1,900 a quarter you have a real deployment decision, I don't.