Dividend Reinvestment Plan

(redirected from Dividend Reinvestment Programs)

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 ?
So far in 2003, PPL has issued about $100 million under its structured equity shelf and dividend reinvestment programs.
In addition, an exhibitors showcase will provide attendees with information on direct purchase plans, dividend reinvestment programs, annual reports and further knowledge about the companies' products and services.
com, MyStockFund will integrate widely accepted principles of long-term investing, dollar-cost-averaging and dividend reinvestment programs into an easy-to-use online platform that supports and encourages individual investors to build wealth over time.
In recommending the authorization of the new stock, National City's board of directors stated it was advisable to have additional shares available to be used in connection with possible acquisitions, equity financing requirements, payments of stock dividends or other stock distributions, employee stock incentive programs, dividend reinvestment programs and other general corporate purposes.
In contrast, 850 companies offer dividend reinvestment programs.
Another benefit of the Low Cost Investment Plan is that it enables members to invest in the dividend reinvestment programs of corporations for a minimal one-time charge of $5 for each stock they wish to buy.
Quarterly dividends supply not just income to live on, but can also provide a convenient mechanism for dollar cost averaging through dividend reinvestment programs.
In recommending the authorization of additional authorized shares, BancFirst's board of directors stated that it was advisable to have the shares available to be used in connection with possible acquisitions, equity financing arrangements, payments of stock dividends or other stock distributions, employee stock incentive programs, dividend reinvestment programs, or other general corporate purposes.
The plan allows members to invest in the dividend reinvestment programs of a number of corporations for as little as $5.
These shares will be made available for use in the company's employee benefit and dividend reinvestment programs.
Customers also benefit from free services including check writing, Dividend Reinvestment Programs, IRA accounts and Asset Management Accounts.
Reinvestment -- 58 percent of the firms reported active dividend reinvestment programs, in place an average 13 years.