Dividends are payments made by a company to its shareholders when the company decides to distribute some of the profits. The company will decide how much you'll receive or if you receive anything at all.
Those companies which do pay out dividends will typically make these payments two or four times a year. The range of dividends paid can vary quite a bit and these payments are never guaranteed.
When you receive a dividend and where we can, we offer you the option to either take the cash or reinvest it back in to the same investment that paid you the dividend.
We have discounted fees for dividend reinvestment of just £1.50 per purchase. This makes dividend reinvestment a cheap and easy way to continually top up your investments.
When you start to make a snowball, that tiny snowball doesn’t seem to grow very fast. But the bigger it gets, the quicker it grows. The same is true with reinvesting your dividends. If you continually add to your investment pot, it too will accelerate in growth without you having to add your 'own' money in.
Naturally, reinvesting dividends still carries the same level of risk as normal investing and means you’ll be increasing your exposure to one particular stock or company. Before starting you should be confident that your investment portfolio is diversified enough to smooth out any ups or downs in the stock market.