Dividend Reinvestment Plan – What is it all about?
A dividend reinvestment plan is also called a dividend reinvestment program or DRIP. It is an investor’s tool. A DRIP pays a compounding interest that enables shareholders to increase their shares without paying much.
They simply reinvest their dividends to accumulate more earnings. By so doing they increase their quantity of shares. Dividend reinvestment programs are very beneficial to shareholders, therefore. They let them earn from a compounding interest and from the stock.
How does a dividend reinvestment plan work?
Instead of receiving their dividends by mail, or in their brokerage account, shareholders receive nothing. Their dividends are used to purchase more shares of stock in the business that paid them.
How to benefit from a dividend reinvestment plan
If you want to benefit from DRIPs, you must purchase shares from companies that have these reinvestment plans. You do not have to worry about how to locate them. Brokers can buy DRIPs on your behalf.
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