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 ?
He participated in the fund's dividend reinvestment program and elected to reinvest all dividends in additional shares of the same fund.
Last month C announced that it had approved a Dividend Reinvestment Program or DRIP.
CFC has taken actions that enhance its capital structure through a $500 million trust preferred issuance in April 2003, a common equity offering in May 2003 totaling approximately $150 million, and its dividend reinvestment program.
The IAP is a direct stock purchase and dividend reinvestment program with an initial investment as low as $50.
The company substantially reduced its dividend effective the fourth quarter of 2001 and changed its dividend reinvestment program, which should save C$300 million per year, has put in place tax strategies to make use of losses obtained through the 2000 acquisition of Clearnet and has substantially reduced its capital expenditures from C$2.
Shareholders will also be offered an opportunity to participate in the Company's newly formed Dividend Reinvestment Program.
In order to provide our shareholders with the opportunity to participate immediately in the Dividend Reinvestment Program, the next quarterly cash dividend payment will be postponed by one month.
Shareholders may obtain information on The Marcus Corporation's dividend reinvestment program and e-mail requests to the company's transfer agent through the site.
EVB operates a dividend reinvestment program available to all shareholders of record.
The Company implemented a Dividend Reinvestment Program in May of 2000.