Best Brokers for Dividend Investing (DRIP)
With the bear market now in full swing on the back of a global pandemic, many are asking: which broker or app is the best for dividend investing?
This is an essential question. With the longest bull market in history, conservative investing trumps daring option trading. The best app for dividend investing replaces the best app for cheap options trading.
And this bear market feels unique as inflation continues to climb alongside rising central bank rates. All else held equal, the duration science tells us that bond prices should decrease as yields increase.
Duration refers to inverse sensitivity bonds have to interest rates, which increase alongside jumps in inflation. So, dividends reign supreme unless you’re willing to take a (likely) hit through falling bond prices.
In this article, we review the best brokers for dividend investing, paying special attention to dividend reinvestment options, fees, investment choices, and other special perks.
What Makes a “Best” or Leading Dividends Broker?
We consider several factors in rating dividend brokers, including:
- Dividend reinvestment plan (DRIP)
- Investment universe
- App ease of use
- Customer service
- Research
- Fees
An exceptional broker for dividend investing offers a (1) dividend reinvestment plan, (2) a wide investment universe of multiple asset classes, (3) an easy-to-use mobile app, (4) 24/7 customer service, (5) several free research options, and (6) zero or minimal fees.
Best Brokers for Dividend Investing
Here are our top picks, in order:
Interactive Brokers
With the IBKR Lite (retail) platform, you receive the essential perks of automated dividend reinvesting. No account minimums, no commissions, extensive research, mutual funds, and access to a few of the major cryptocurrencies. IBKR also represents the default choice for investors outside the US, especially with a new and streamlined trading app: IBKR GlobalTrader.
Charles Schwab
A solid choice for most investors, Schwab also offers automated dividend reinvesting, no account minimums, no commissions, extensive research, and a wide mutual fund selection alongside stocks, options, bonds, and ETFs.
Fidelity
As another household name, this broker provides a similar offering to Schwab yet suffers from one key, though minor, drawback – a $32.95 fee for broker-assisted trading.
TD Ameritrade
It offers the same perks plus bonds, mutual funds, and dividend reinvesting. Strangely, the broker fails to provide fractional shares which is now common with brokers such as Schwab and Fidelity. However, their research is fantastic.
Ally Invest
Also featuring dividend reinvesting, no commissions, and no account minimums alongside bonds, Ally marks a respectable choice. While it has no mutual funds on offer like Schwab or Fidelity, it provides a good platform catering to active traders.
Robinhood
Even though this is a famous discount broker (like the legend) offering commission-free trading to all, it does not offer bonds, mutual funds, and retirement accounts. However, it provides dividend reinvesting plus cryptocurrency. Still, you can access Robinhood business account, if you have a company.
1# Interactive Brokers
Interactive Brokers at a glance
Founded in 1978, Interactive Brokers holds the unofficial title of being the globe’s default online broker. Their international presence and availability are unmatched.
The broker provides dividend reinvesting, no stock and ETF commissions, no account minimums, over 17,000 no-transaction-fee mutual funds, extensive research, two trading platforms, a decent mobile app, and even an Interactive Brokers business account, in case you have a company. IBKR shines through its desktop trading platforms, IBKR Lite and IBKR Pro, particularly for sophisticated traders.
Their customer service is good, but there are no in-person branches. Phone, email, and live chat are available.
Interactive Brokers remains available to residents of more than 200 countries. If you reside outside the USA, then strongly consider this broker, particularly if you’re looking for a streamlined trading app such as IBKR Global Trader.
2# Charles Schwab
Charles Schwab at a glance
Founded in 1971, Schwab represents a trusted name in the business of investment brokers. For most investors, we feel this is the best broker for dividend investing and app for dividend investing.
Aside from cryptocurrency, they kept up with the times. The broker offers dividend reinvesting, no stock and ETF commissions, no account minimums, over 4,000 no-transaction-fee mutual funds, research from 14 different providers (i.e., Moody’s, Morningstar, etc.), three separate trading platforms, and two mobile apps: SchwabMobile and StreetSmart Mobile. A Charles Schwab business account is also available.
Further, they provide incredible customer service. Phone, email, live chat, and in-person support (Monday to Friday, 8 a.m. to 5 p.m., some branches have limited Saturday hours) are all there.
Charles Schwab is available only to US residents. Charles Schwab International is a solid alternative for foreign investors based in many different countries seeking access to US equities, but with a $25,000 account minimum.
3# Fidelity
Fidelity at a glance
Founded in 1946, Fidelity marks another fantastic choice. They compete directly with Charles Schwab for being the best app for dividend investing.
However, they also lack access to cryptocurrencies. The broker provides dividend reinvesting, no stock and ETF commissions, no account minimums, over 3,700 no-transaction-fee mutual funds, extensive research, two trading platforms, and a solid mobile app.
Their customer service is also great. Phone, email, live chat, and in-person support (more than 200 local branches) are on offer too.
Fidelity is available only to continental US residents, and is unfortunately not suitable for foreign investors.
4# TD Ameritrade
TD Ameritrade at a glance
Founded in 1975, TD Ameritrade brings another veteran provider to our list.
They fail to provide access to cryptocurrencies and fractional shares. The broker offers dividend reinvesting, no stock and ETF commissions, no account minimums, research from 15 providers (including Morningstar and Reuters), two trading platforms, and two mobile trading apps.
Their customer service earns top marks. They have phone, email, live chat, and in-person support through over 250 branches.
TD Ameritrade provides brokerage accounts to non-US citizens as well, similar to Interactive Brokers.
5# Ally Invest
Ally Invest at a glance
Founded in 2009, Ally Bank’s parent Ally Invest represents a relative newcomer, but opened the door to online banking in the USA.
They fail to provide access to cryptocurrencies, fractional shares, and no-transaction-fee mutual funds. The broker offers dividend reinvesting, no stock and ETF commissions (on eligible U.S. securities), no account minimums, research from 11 providers (including Morningstar and Lipper), an advanced trading platform, and an in-depth trading app.
Their customer service is good, but again not to the level of Schwab nor Fidelity. Phone, email, and live chat are available.
Ally Invest is available only to US residents possessing a social security number.
6# Robinhood
Robinhood at a glance
Founded in 2013, the discount broker Robinhood strives to uphold the medieval legend by giving online trading to all of us.
They lack the more premium features from this list, such as mutual funds, bonds, and retirement accounts. However, the broker offers dividend reinvesting, no stock and ETF commissions, no account minimums, basic research, a solid trading platform, and a streamlined mobile app.
Their customer service is great by extending itself to social media, a unique feature to online brokers. Phone, email, social media, and live chat are available.
Robinhood is available only to US residents, but there are global expansion plans through cryptocurrencies first.
Which is the best alternative?
The veteran brokers excel in serving dividend-focused investors over newer or online-only competitors.
A dividend reinvestment plan alongside commission-free trading (for US stocks and ETFs, at least) gives us the bottom line to any decent broker. If a broker fails to provide DRIP while you’re looking for a “one-stop-shop,” then consider moving on.
There are many options out there. Frankly, it’s a little confusing too, especially as an international investor. This is why we’ve done the work of examining six leading options for you.
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Did we answer all your questions? If not, please let us know in the comments section below!
Other FAQs
Which is the best broker for dividend investing?
This remains a personal decision. Do you want access to in-depth research (Schwab), or are you more concerned about fees (Robinhood)?
Why are there limited options for non-US investors?
Some of the most popular stocks and ETFs are from the United States, and arguably, the majority of interested investors are from the country as well. Fortunately, there are solid brokers available to international residents, such as Interactive Brokers and TD Ameritrade.
How does DRIP or automatic dividend reinvesting work?
Through a desktop platform or a mobile app, eligible brokers usually offer an intuitive method for selecting “yes” or “on” with respect to automatic dividend reinvesting. When this option is selected, dividends are reinvested into additional stock shares instead of arriving as direct cash distributions.
In what countries can I find automatic dividend reinvesting?
A Dividend Reinvestment Plan (DRIP) is available in the US, UK, and Canada.
Conor is a CFA charterholder who has been active in the wealth management industry since 2012, continuously researching the latest developments affecting portfolio management and cryptocurrency.
