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".
WalletHub Answers is a free service that helps consumers access financial information. Information on WalletHub Answers is provided “as is” and should not be considered financial, legal or investment advice. WalletHub is not a financial advisor, law firm, “lawyer referral service,” or a substitute for a financial advisor, attorney, or law firm. You may want to hire a professional before making any decision. WalletHub does not endorse any particular contributors and cannot guarantee the quality or reliability of any information posted. The helpfulness of a financial advisor's answer is not indicative of future advisor performance.
WalletHub members have a wealth of knowledge to share, and we encourage everyone to do so while respecting our content guidelines. This question was posted by a WalletHub user.
Please keep in mind that editorial and user-generated content on this page is not reviewed or otherwise endorsed by any financial institution. In addition, it is not a financial institution’s responsibility to ensure all posts and questions are answered.
Ad Disclosure: Certain offers that appear on this site originate from paying advertisers, and this will be noted on an offer’s details page using the designation "Sponsored", where applicable. Advertising may impact how and where products appear on this site (including, for example, the order in which they appear). At WalletHub we try to present a wide array of offers, but our offers do not represent all financial services companies or products.