Robinhood is powerful free investing app for US citizens & residents to trade stocks, ETFs and options for free. One of the most common questions you may ask is: How exactly does Robinhood distribute dividend payments to investors?
Dividends go through a simple 3 step process on the Robinhood app:
- The company announces the dividend pay date to the public
- If you own the stock after the ex-dividend date, Robinhood will show your dividend as “pending” under Settings & Statements -> Dividends
- Robinhood will distribute your cash dividend to your account as cash
Currently, Robinhood does not offer a DRIP plan for investors so you cannot automatically reinvest the dividend back into more shares. Since Robinhood uses a clearing house to pay dividends, it's difficult for them to offer this much needed service.
The apps target market is also much younger and the overall account balances are lower than bigger traditional brokerage firms.
If you are looking for a broker with free stock trades along with a DRIP, I recommend Fidelity or Charles Schwab. Dividend reinvestment is a powerful way to accelerate the benefits of compound interest and compound your dividend payments over time.
Looking for some high dividend yield stocks on Robinhood? I wrote a complete list of high dividend stocks that are all available on the Robinhood app.