Are there any problems with this type of stock market system?
The inherent problem with using formula plans are two-fold.
First, in order to succeed, the investment relies heavily on a previous track record. As such, new stock issues cannot be included in this system - as no track record exists.
Second, if, for any reason, declared dividend income payable goes down, then the whole formula is washed-up and time has come to sell the stock. The problem here is that by the time the company declares its stock dividend, most of the other investors will have sold their positions and finding a buyer to purchase your stock, which you will have compounded over time, may be problematic.