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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).

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 ?
Sherrie Parks, executive director of the Dripping Springs Chamber of Commerce, said the town boasts 36 wedding venues in a 17-mile radius - the most of any city in Texas, Parks said.
A problem of root rot/wilt could be expected due to continuous dripping and excessive wetting in the nearby surrounding of the main trunk.
Dripping Springs Bank President, Dena Roesler, has lived in Dripping Springs for over 10 years and has worked in Hays County for over 10 years.
The dripping was made by Doncaster-based Nortech Foods and the company was this week carrying out a trade withdrawal to recover any remaining dripping from its customers.
The new results may also apply to everyday problems such as dripping of industrial coatings or wet ceilings.
Fat and meat juices dripping onto hot coals can cause sudden bursts of flame - called flare-ups - which char your food.
If you throw a steak or hamburger on the grill and let it get really brown--the fat's dripping off it and flames and smoke are shooting up--that's the stuff you don't want to do," says the NCI's Rashmi Sinha.
Building superintendents are able to stop the dripping temporarily by replacing faucet washers.
Department of Energy's plan to claim safety credit for "drip shields" expected to protect metal nuclear waste containers from water dripping into the proposed underground waste dump at Yucca Mountain.
Sobel's ardent and uncannily timely experimentation (she used sand and enamel as well as oils and adapted glass pipettes from her husband's costume-jewelry business for dripping and blowing paint) is hard to imagine without some kind of corroborating factor.
For you to notice it, there's probably quite a bit of extra dripping going on - or the mucus thickened up if there's a sinus infection.