Interesting thought. I suppose it depends on whether you believe in the dividend irrelevance theory or not. Who can put money to better use? You or Warren?
if you think you can make better use of the dividend, why buy that company's shares at all?
even if a dividend were break even compared to the capital gains from reinvesting directly, you would still come out worse from having it taxed as income.
It's not that simple; a company may have a great use for part of their revenue but not for the rest. If a company spends $1 to make $2, but can't simply spend $2 to make $4 (market may be tapped out, or require lowering prices to reach the rest - reducing the average returns), they have to figure out some different way to spend the extra $1, and which you might think they are not good at.
In fact, this is easy to see in practice: Apple has tremendous amounts of capital reserves which they are just investing on the market. In fact, $35B of those are in US Treasuries. Is it that absurd to think one can make a better investment than that?
Depends how you do it and tax treatment an dif your working or not in the UK you can use ISA's to avoid all tax on dividends.
Also in the UK you have a separate tax allowance for dividend income.
What I also do is stop reinvesting dividends when funds are at a premium to NAV. I have also stopped reinvesting dividends as I think the market will fall this year - I can then buy after the market has fallen.
You could also be cute and reinvest your dividend income into a pension and get tax relief back.
