See: Constant dollar plan.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.
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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
The automatic purchase of additional shares of an open-end investment company using any dividends and capital gains distributions that are made by the firm. This option (in lieu of actually receiving payments) permits a mutual fund shareholder to increase his or her holdings in the fund. Taxes must be paid on the amount reinvested even though no funds are received directly. See also dividend reinvestment plan.
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.