Dividend Reinvestment Plan


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Dividend Reinvestment Plan (DRP)

Plan which provides for automatic reinvestment of shareholder dividends in more shares of a company's stock, often without commissions. Some plans provide for the purchase of additional shares at a discount to market price. Dividend reinvestment plans allow shareholders to accumulate stock over the long term using dollar cost averaging. The DRP is usually administered by the company without charges to the holder.

Dividend Reinvestment Plan

A practice or agreement in which dividends on a security are used to buy more of the same security rather than be disbursed to the investor in cash. A dividend reinvestment plan is relatively common in mutual funds; investors agree to use dividends and other capital gains to reinvest in more shares of the mutual fund. While this involves assuming more risk in the mutual fund, it carries the possibility of higher returns.

dividend reinvestment plan (DRIP)

A plan that allows stockholders to automatically reinvest dividend payments in additional shares of the company's stock. Instead of receiving the usual dividend checks, participating stockholders will receive quarterly notification of shares purchased and shares held in their accounts. Dividend reinvestment is usually an inexpensive way of purchasing additional shares of stock because the fees are low or are completely absorbed by the company. In addition, some companies offer stock at a discount from the existing market price. Usually these dividends are fully taxable even though no cash is received by the stockholder. Also called automatic dividend reinvestment, reinvestment plan. See also super DRIP.

Dividend reinvestment plan (DRIP).

Many publicly held companies allow shareholders to reinvest dividends in company stock or buy additional shares through dividend reinvestment plans, or DRIPs.

Enrolling in a DRIP enables you to build your investment gradually, taking advantage of dollar cost averaging and usually paying only a minimal transaction fee for each purchase.

Many DRIPs will also buy back shares at any time you want to sell, in most cases for a minimal sales charge.

One potential drawback of purchasing through a DRIP is that you accumulate shares at different prices over time, making it more difficult to determine your cost basis -- especially if you want to sell some of but not all your holdings.

References in periodicals archive ?
3% of the outstanding common stock of the Company as of December 21, 2006, have committed to Xerium that, upon the establishment of the dividend reinvestment plan, they will participate in the plan through December 31, 2007 at a level such that at a minimum 50% of each cash dividend payable on the Company's common stock, including shares not held by the Apax entities, is reinvested in the common stock of the Company through the dividend reinvestment plan, provided that the Apax entities are not required to reinvest more than 100% of the cash dividends payable to them with respect to such dividend declaration.
We are pleased to announce our 15th consecutive quarterly dividend which, in conjunction with the Dividend Reinvestment Plan, provides shareholders with a current return and an opportunity to expand their investment in the company," said Joe Martori, chairman of ILX Resorts.
In connection with the conversion, the Fund will suspend its dividend reinvestment plan following completion of the reinvestment of the dividend declared April 26 that is payable May 19, 2006.
The quarterly dividends, in conjunction with the Dividend Reinvestment Plan, provide shareholders with a current return and the opportunity to expand their investment in the company," said Joseph P.
The Company also announced that its recently approved Dividend Reinvestment Plan (the "Plan") has been established and is now in effect.
equi serve, corn), a company that allows investors to make direct investments in publicly traded companies through Dividend Reinvestment Plans (DRIPs).
Many corporations raise capital by adopting dividend reinvestment plans (DRIPs), which permit shareholders to reinvest dividends at a discount.