automatic dividend reinvestment

Automatic Dividend Reinvestment

A practice or agreement in which dividends on a security are used to buy more of the same security, rather than disbursed to the investor in cash. Automatic dividend reinvestment 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.
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automatic dividend reinvestment

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.
References in periodicals archive ?
Before selling any fund shares at a loss, investors who use automatic dividend reinvestment should check with the fund to determine whether a distribution has occurred or will occur within the 61-day period.
However, with fund shares, taxpayers may not be aware that a purchase will occur within the 61-day period as a result of the automatic dividend reinvestment option.
Further, unless a stockholder elects otherwise, the mentioned distributions will be reinvested automatically in the fund's shares of common stock as provided in its automatic dividend reinvestment plan.
The "Buy One Share" program is designed to help investors gain entry into automatic dividend reinvestment programs (DRIPS).
Further, the shareholders of these monthly distributions can accumulate more shares in a fund via the automatic dividend reinvestment plan, which when a fund's shares are trading at a premium, distributions will be automatically reinvested via the plan at NAV or 95% of the market price, whichever is greater; and if shares are trading at a discount, distributions will be reinvested at the market price through an open market purchase programme.
Common stockholders can reinvest these in additional common shares through the fund's automatic dividend reinvestment plan and the plan administrator is DST Systems Inc.
Jason James owned 10,000 shares in the Polar Fund and participated in its automatic dividend reinvestment program.
To find out if a particular company offers an automatic dividend reinvestment plan and will allow you to buy directly from it, call the investor relations department.

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