Dividend reinvestment is one of the easiest ways to grow an investment portfolio over time. If you want your dividend payments to automatically purchase additional shares instead of remaining as cash, you can enable DRIP (Dividend Reinvestment Plan) in your account. Learning how to reinvest dividends on Fidelity only takes a few minutes, although the setup process is not immediately obvious inside the app.
It’s important to know that many mutual funds, such as FXAIX and FSKAX, automatically reinvest dividends by default. However, stocks and ETFs pay dividends to cash unless you manually change the setting. If you want compounding to work for you, you need to reinvest dividends on Fidelity yourself.
How to Reinvest Dividends on Fidelity Using the App
Fidelity does not provide a dedicated dividend settings page inside the mobile app. Instead, you need to use the Fidelity Assistant.
Follow these steps:
- Open the Fidelity app.
- Tap the search icon in the upper-right corner.
- Type “dividend reinvestment”.
- Select the suggested question, “How do I automatically reinvest dividends?”
- The Fidelity Assistant will guide you through the process.
- Choose the account you want to update.
- Select Reinvest in Security.
- Tap Confirm.
Once complete, Fidelity states that the change may take up to five business days to become effective.
Understanding Your Dividend Reinvestment Choices
When you choose Reinvest in Security, every dividend payment automatically buys additional shares of the investment that generated it.
For example:
- SCHD dividends purchase more SCHD shares.
- Apple dividends purchase more Apple shares.
- Each holding compounds independently.
The alternative option, Deposit to Core Account, sends dividend payments to your core cash position, such as SPAXX, instead of reinvesting them.
For investors who want long-term growth without managing every payment manually, choosing to reinvest dividends on Fidelity can simplify the process.
How Dividend Reinvestment Works Across Your Account
Enabling dividend reinvestment at the account level applies to all current and future positions within that account.
This means:
- Every stock and ETF reinvests into itself.
- Dividends are not combined into a single investment.
- New holdings you purchase in the future will automatically follow the same setting.
Once enabled, the process runs in the background, allowing compounding to happen automatically.
How to Verify DRIP on Fidelity Desktop
If you want to confirm that the changes were applied correctly, the desktop website offers a much clearer view.
Steps to Check Your Settings
- Sign in to Fidelity on your computer.
- Click Accounts & Trade.
- Select Account Features.
- Scroll to the Brokerage & Trading section.
- Find Dividends and Capital Gains.
- Click Manage.
This page shows every position in your account and whether dividends are set to:
- Reinvest in Security
- Pay to Cash
If your investments already display Reinvest in Security, then the app setup worked successfully.
How to Customize Dividend Settings by Investment
One advantage of the desktop website is that it gives you more flexibility.
Unlike the app, which applies a single setting to the entire account, the desktop version lets you customize each position individually.
For example, you can:
- Reinvest SCHD dividends automatically.
- Receive Apple dividends as cash.
- Adjust settings separately for every stock or ETF you own.
This feature provides additional control for investors with different income and growth goals.
What About SPAXX?
You may notice that SPAXX already has dividend reinvestment enabled by default.
Fidelity automatically reinvests the interest earned on idle cash held in SPAXX. In most cases, there is no need to change this setting because it is already configured to compound automatically.
Why Reinvesting Dividends Matters
Choosing to reinvest dividends on Fidelity allows your portfolio to grow through the power of compounding. Every dividend payment purchases more shares, which can generate additional dividends in the future.
However, dividend reinvestment works best when combined with regular contributions. Adding new money consistently and allowing dividends to compound together can help build wealth over the long term.
Once DRIP is enabled, the process becomes largely automatic, making it easier to stay invested and let your portfolio grow over time.
