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.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

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.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
Dividend Reinvestment Plans (DRIPs) are programs that allow individuals to purchase stock directly from the company.
Dividend reinvestment plans. A plan sponsor that does not use the dividends on ESOP shares to repay an exempt loan alternatively can obtain a deduction by distributing the dividends to participants in cash within 90 days of the close of the plan year.
In addition, companies commonly provide dividend reinvestment plans for their shareholders.
Dividend reinvestment plans emerged in the 1960s when AT&T offered shareholders the opportunity to reinvest dividends in shares of stock.
One of those accounts is with EquiServe (www.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.
She invests through dividend reinvestment plans (DRIPs).
Another way to purchase stocks directly from a company is through direct stock plans (DSPs) and dividend reinvestment plans (DRIPs), accounts that allow you to buy shares directly from a company's headquarters.
You can also buy stocks on the cheap through dividend reinvestment plans (DRIPs) but you will first have to buy shares of a given company through your broker.
You can participate in direct stock purchase plans (DSPPs), or dividend reinvestment plans (DRIPs).
To avoid paying broker fees, you can buy high-quality equities through direct stock purchase plans (DSPs) or dividend reinvestment plans (DRIPs), in which you buy stocks directly from a public company.
Investors 2000, Washington Metro and Minority Investment all use dividend reinvestment plans (DRIPs), accounts you open directly with a company that allow you to buy shares from headquarters.