Amy Arnott, portfolio strategist for Morningstar Inc., discusses how a popular dividend investing strategy works, and who would or wouldn’t benefit from it.

On this episode:

• Let’s focus on when dividend reinvesting works as a strategy and when it does not. Who should consider reinvesting dividends?
• When shouldn’t an investor reinvest their dividends?
• Are there any differences between reinvesting dividends in a taxable vs a tax-deferred account?
• What types of dividends are taxable and non-taxable?

This part of the episode includes a correction: A response about which dividends are taxable versus nontaxable should have said, “If you're in a bond fund, most dividends would be taxable unless you’re investing in Treasury bonds, which would normally be exempt from state and local taxes.” We incorrectly said federal taxes.

• How long you’ve owned a dividend-paying stock matters when it comes to taxes. Can you explain the differences between qualified and non-qualified dividends?
• What kind of record-keeping does reinvesting dividends require, and how does reinvestment affect the cost-basis?
• How are considerations different for stock dividends vs fund dividends?
• What’s the final takeaway for the audience about dividend reinvestment?

Read about topics from this episode. 

When to Reinvest Dividends (or Not)

These 4 Dividend ETFs Strike the Right Balance for Income Investors

10 Top Dividend Stocks for 2025

13 Elite Companies With Fast-Growing Dividends

What Are Dividends?

The 10 Best Dividend Stocks

The Best Dividend Funds

What Makes a Great Dividend Fund?

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Read what our team is writing:

Amy C. Arnott

Ivanna Hampton

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