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 ?
DRPs on Disk lists 975 companies that offer dividend reinvestment plans to their common stock shareholders.
equi serve, corn), a company that allows investors to make direct investments in publicly traded companies through Dividend Reinvestment Plans (DRIPs).
12 /PRNewswire/ -- Evergreen Enterprises publishes the oldest directory on dividend reinvestment plans (DRPs).
Many corporations raise capital by adopting dividend reinvestment plans (DRIPs), which permit shareholders to reinvest dividends at a discount.
By eliminating the discount, this brings the terms of the Plan in line with those of most other dividend reinvestment plans offered.
These direct stock-purchase programs are enhanced versions of dividend reinvestment plans or DRIPs.
July 20 /PRNewswire/ -- Investors who participate in dividend reinvestment plans (DRPs) don't like down markets, but they do appreciate the opportunity to buy more shares of a stock they already own and believe in, according to Sumie Kinoshita, Editor of the "Guide to Dividend Reinvestment Plans.
The fast-food chain is among a growing list of companies that are bypassing brokers through dividend reinvestment plans, or DRIPs.
Most companies that issue dividend-paying stock also have automatic dividend reinvestment plans.
July 7 /PRNewswire/ -- Dividend reinvestment plans (DRPs) offer a way around the difficulty of executing stock trades within the new three-day settlement (T+3) requirement.
Dividend reinvestment plans do have some disadvantages, particularly in the area of taxation.
10 /PRNewswire/ -- Evergreen Enterprises released its quarterly Update to the Guide to Dividend Reinvestment Plans.