If you start investing in stocks, you might have some stocks or ETFs that pay you a dividend. In this article I want to discuss how these payments work at my favourite investment platform. So let’s talk about DeGiro dividend payments!
Disclaimer: This article contains affiliate links to DeGiro. If you click them and sign up, I might receive a financial compensation. This is at no extra cost to you, and it greatly helps me run this web site.
What Is Dividend Again?
Companies make money. And companies that don’t make money, go out of business. So you could say that on average if you were to invest in the entire stock market, your investments should make some money.
What companies do with all this cash they generate is up to them. Some may want to keep all their cash
This dividend can be paid out to shareholders on a monthly, quarterly, or annual basis. Most companies pay a quarterly dividend though.
If you hold individual stocks, of with I’m not a fan, you will receive the dividend when they pay it out. If you hold ETFs or index funds, it depends on the fund what they do with it.
Some funds might not pay out dividends at all. Instead, they use the dividends they receive from their investments to buy more shares, effectively increasing the value of your investment by exactly the dividend amount. Other funds might distribute the dividends. Usually, they do so on a quarterly basis.
I invest in two index tracking ETFs at DeGiro, one of them accumulates dividends (IUSN) and the other one distributes them (VWRL).
DeGiro Dividend Payments
Now you might wonder how dividend payments work when you invest through DeGiro. Actually, things are very easy.
First, you add cash to your account. You can read how to invest using DeGiro in this article.
With that cash, you buy individual stocks or ETFs, and then you hold them. I don’t trade shares, my intent is to buy them and hold them forever. Unless, of course, I find something better to do with this cash.
Let’s assume a fund that pays a quarterly dividend. At the end of the quarter, the fund might decide to pay out a dividend and announce this payment on the announcement date. Around this time, you might see something in your DeGiro account under “Corporate Actions”. On this screen, you can see how much dividends you can expect to receive.
This announcement date is usually a week before the ex-date, the date on which the fund begins to trade without the dividend value. In most cases, about two weeks later the cash (or stock dividend) is received in your account.
When investing through DeGiro, dividends are automatically put in your account. The dividend is paid out into your cash holdings. You can then use this cash to trade.
Differences In Dividend Payments Between Basic and Custody Accounts
There are two different types of accounts at DeGiro. They are called “Basic” and “Custody”. In the Basic plan, your shares could be subject to security lending, something I might write about later. With the Custody account, there is no security lending.
With regards to fees you pay DeGiro when receiving dividends, it’s quite simple. If you have a Basic account, there are no fees. The dividend you receive is yours.
With a Custody account, this is different. If you receive dividends using a DeGiro Custody account, you will pay a fee. This fee is – as of the moment of writing – 1 EUR + 3% of the dividend amount received, with a maximum of 10% of the dividend received. Here you can find the actual costs on the DeGiro website.
This means that your dividend returns will be lower using a DeGiro Custody account compared to a Basic account.
How Can You Reinvest Dividends with DeGiro?
You might wonder why you would need the cash dividends in your account. After all, if you’re still working to build up your capital, you need more shares, not some euros in an account.
So the question arises, can you automatically reinvest your DeGiro dividend payments? Unfortunately, today the answer is no. You will always receive the cash in your account. You will have to purchase more shares manually with this cash.
I would be happy if DeGiro implemented a dividend reinvestment feature in their platform. That would make my life, and that of all of us who invest in dividend distributing funds, a whole lot easier.