Charles J. Stevens, Principal, evergreen financial, LLC
@CharlesStevens
Cash is my recommendation for two reasons. With cash, you have the "cash" to pay the taxes due on dividend income come next April 15th. It also can increase your personal csh flow.
Reinvesting dividends creates, unless you are a meticulous record keeper, a tax time nightmare. When you sell stock, unless you instruct the broker otherwise, your first purchase is the cost basis for the gains taxes due. If dividends are reinevested, you will need to specify which purchses you are selling to determine a gain or less. Keep the stock for five or six years (my experience tells me most dividend reinvestors are long term investors) and you can see the accounting problems you are creating.
And don't ignore the one of the old quotes in investing: "cash is king".
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