We have been using the Robinhood app build a dividend portfolio that we hope to replace our current income over time. We are tracking the monthly progress of our dividend growth portfolio and continually reinvest our proceeds from our passive income streams. However, a number of people have had continuous questions regarding how Robinhood dividends work and what to expect. Let’s break it down. 

How Does Robinhood Pay Dividends: 3 Reasons You Don’t Need a DRIP

A core strategy for Millionaire Mob is building a dividend growth portfolio using only side hustle income to achieve financial freedom.

I’ve been using the Robinhood app to create a dividend portfolio that creates long-term wealth through dividends and capital appreciation.

So far, Robinhood has been a fantastic platform to build a dividend portfolio through. The Robinhood app is very slick, simple and easy to use. If you join now, we both get a share of free stock.

I love dividends so much that I wrote a book about it titled Dividend Investing Your Way to Financial Freedom.

Download a free sample of how I plan to achieve financial freedom from investing:

Click here to download

Let’s dive into the many details about Robinhood that you need to know.

What is the Robinhood app?

Robinhood is a brokerage firm that offers commission-free stock and options trading for all stocks. Robinhood gained much of its popularity due to the unbelievable interface of the app and simplicity.

This has helped a number of investors get involved in the stock market no matter the size of their wallet. You can take $100 and buy 20 shares of $5 stocks for literally no cost.

With the fact that there is commission-free stock and options trading, I have saved thousands in commissions fees. This has helped me build a more efficient and stable portfolio over time. The ultimate goal is to get to the point of living off dividends.

Personal Capital has a future value planning tools that track your current retirement savings. This is a free tool that enables you to build wealth effectively and monitor your accumulated wealth over time.

It is very easy to link all of your accounts and is highly secure. I love seeing my dividends pour into my income and cash flow analysis on the Personal Capital dashboard. The dashboard is a great way to monitor accumulated wealth over time.

Once I saw the fact that Robinhood offered commission-free trading, I was an immediate fan. The opportunity to pay no commissions is so significant because these fees can erode your investment returns over time. Especially, if you have smaller sums of money to invest.

After knowing that Robinhood offered no commission trading, I didn’t even need to see the Robinhood app interface. However, once I did see the Robinhood app, I was blown away.

Let’s get into our Robinhood guide to help you understand how you can receive dividends to improve your cash flow.

How does Robinhood pay dividends?

Robinhood pays you your dividends automatically by using a clearing firm. This is no different than any other brokerage firm out there.

A clearing firm just handles the settlements and transactions with stocks to ensure that they happen efficiently. This is a great way for brokerages to ensure the cash transfers are organized. With technology in modern times, clearing firms are pretty automated to allow for automatic dividend payments and transfers nearly instantaneously.

Robinhood pays out dividends just like any other brokerage firm does.

To find out where your Robinhood dividends show up, follow these steps:

1. Open the Robinhood app 
2. Click in the top left to view your navigation panel
3. Push the section ‘History’
4. In your history, it will show you both future and historical dividend payments for stocks that you own

Easy! Check out how your dividends show up in your Robinhood account. I love the interface.

Here is a graphic that shows where your dividends show up on the Robinhood app.

Source: Robinhood App

Robinhood has been very good at paying dividends. I like to keep my push notifications on with the Robinhood app. This keeps me informed when I receive a dividend payment.

It makes my day when I see income come in. Nothing is better than seeing your money work for you… Even when you sleep.

How do dividends work? Here is a schedule of the dividend process

Dividend dates can be somewhat confusing since there are so many to follow. The two most important dates are the ex-dividend date and payment date. Dividend payouts follow a set procedure as follows:

1. Declaration date: This is when the announcement is made that the company’s Board of Directors approved the payment of the dividend.
2. Ex-dividend date: The ex-dividend date is when investors are cut off from receiving a dividend. If you did not own the stock on the day before this date, you will not receive the dividend payment.
3. Holder-of-record date: The holder-of-record (owner-of-record) date is the date on which the stockholders who are to receive the dividend are recognized.
4. Payment date: This is exactly as described. This is when the payment of the dividend actually happens.

Keep up to date with your stocks by building a portfolio to monitor using a variety of platforms.

With FINVIZ, you can create and monitor all of these dates for your portfolio of stocks. We’ve built a guide on how to screen for stocks using FINVIZ.

The dividends received on your Robinhood account will show up in your cash balance at the end of the trading day.

They do not go directly into your checking account… Some people think that might be the case, but it’s not. I take the cash received and manually reinvestment my dividend income into my dividend portfolio.

I created a dividend calculator that will show you what it will take to live off dividends forever.

You can download the free dividend calculator to see what it will take for you to live off dividends.

Download now

What is a dividend reinvestment plan?

A dividend reinvestment plan is an equity investment option from a company that allows electing your dividends as a way to repurchase more common stock in the company at a discounted price. Dividend reinvestment plans (DRIPs) are a great way to build long-term equity in a company over time.

With a DRIP program, you are able to use compound interest to your advantage. Thus, maximizing your overall total return over the long-term. I love this for dividend growth stocks.

With dividend growth stocks, the company is typically increasing their dividend over-time while you do nothing additional. You literally get a raise each year for doing nothing.

See Related: M1 Finance vs Robinhood: What is Better?

Robinhood Dividend Reinvestment Plan (DRIP)

The Robinhood app currently does not support a Dividend Reinvestment Plan (DRIP). A Robinhood DRIP option would be nice to have but it is not essential as you can invest in stocks commission-free already.

In my retirement accounts, I elect to have a few of my stocks, dividend growth funds and (of course) index investments in a DRIP.

I will definitely be on the lookout for a Robinhood DRIP option and will elect for certain stocks to automatically reinvest. I like doing this for stocks that I am pretty cautious on their future.

This allows me to dollar cost average lower without having to do any additional work.

Let’s be clear. I don’t buy stocks that I think are going down. If they might go down, I am totally fine buying additional shares as long as the general investment thesis holds true. I am always looking at acquiring shares for the long-term.

Right now, I am okay with the fact that Robinhood does not offer a dividend reinvestment plan. There are no commissions, so I’m able to invest my dividend payments into my discretion. This gives me much more flexibility over time by investing in dividend stocks that have decreased in price.

I use other brokerage accounts like my IRA to enable a dividend reinvestment plan. This is a great way to have an ‘investing snowball’ that compounds over time.

Why You Don’t Need a DRIP Plan with Robinhood

There are plenty of reasons why you don’t need a dividend reinvestment plan on Robinhood. You don’t need Robinhood to reinvest the dividends for you and here’s why:

1. There are no commissions! You already don’t have to pay commissions with Robinhood. One of the benefits of a DRIP program is the lack of commission on the reinvestment. This is simply not needed with Robinhood.
2. Without a DRIP program, you get to use your own discretion for reinvestment. No need to rely on Robinhood reinvesting your dividends.
3. Since Robinhood doesn’t have DRIP, you can simply use the dividend income to put some extra cash in your pocket.

These are pretty core reasons on why you don’t need to have a DRIP program on Robinhood.

You can pair Robinhood with M1 Finance and create ‘Pies’ for investing. With M1 Finance, your dividends are automatically reinvested. If you’d like to see a few M1 Finance Pie Example, check out my article on powerful M1 Finance Pies.

Robinhood Brokerage Review

I believe the Robinhood app is a perfect platform for basic, simple trading. The Robinhood app and platform has actually helped increase my investment returns.

Let’s break down Robinhood dividends process.

Not just because the brokerage is completely commission-free. It has been a function of the simplicity that has helped my investment returns.

Oftentimes, I have been lost in the shuffle with overly complicated trading platforms trying that cater to professional traders. These platforms would always try to turn the ordinary retail investor into a day trader, which typically means trouble for the retail investor.

My Robinhood app review includes only positives. The Robinhood app features a great interface, easy trading and fast execution. These are the most important considerations that any dividend investor needs.

However, a couple of points that I wish Robinhood would improve include:

1. More advanced options including a dividend reinvestment plan
2. A Robinhood web application, so I can trade using a desktop.
3. More streamlined reporting. I don’t receive my monthly statements via mail and have to go into my Robinhood app to send them to myself to review on a computer. This is a bit of a pain! Especially when you work for a company that has to review these statements!

Robinhood is working on a web application. I’m excited to try it! In addition, I am very pleased with Robinhood’s forward-thinking nature.

They offer commission-free cryptocurrency trading and commission-free options trading!

This is very hard to beat. Options can be a great way to mitigate risk and increase your yield on your investments. We use FINVIZ futures to understand market trends.

Commission-free options trading is key. Most brokerages charge significant commissions on options trading since this is widely viewed as a premium product for investors. I can’t think of any other brokerages that offer commission-free trading on options.

The best stocks for covered call writing typically include dividend-paying stocks. This offers you a great opportunity to increase the yield as you collect a premium from the option AND dividends along the way.

Robinhood Dividends Review

As far as Robinhood dividends go, I wouldn’t change a thing. I don’t think there is anything additional that Robinhood could do to enhance the dividend experience for investors. Robinhood dividends work exactly the same as any other platform.

If there is one thing to change about Robinhood dividends, I believe they should offer a pending dividend or dividend announcement feature in the application. This will enable the investors to understand when the dividends are about to show up the ‘History’ section of their account.

Want to try the Robinhood app? Join now and we will both receive a free share of stock! With Robinhood dividends investing, you can earn additional income over time. Thus, setting yourself up for financial freedom. Stay focused on your plan.

Robinhood Dividend Portfolio Updates

We will keep you updated with our Robinhood dividend portfolio as we continue our pursuit to financial freedom.

1. First update on our dividend portfolio: Robinhood Passive Dividend Income Portfolio – January 2018
2. Robinhood Dividend Growth Portfolio – February 2018
3. Robinhood Dividend Growth Stock Portfolio Update – March 2018
4. June Update – Robinhood Dividend Income Portfolio

Follow further updates on our Robinhood dividend portfolio and don’t miss a single piece of the action on what I am invested in. I hope that our Robinhood guide can help you make a solid decision on improving your financial future through dividend investing and zero fee commission trading.

If you have any questions, please feel free to leave a comment below. I’d love to hear from you.

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