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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 ?
Now here is the lie: all the components in the drip are water soluble which means it's a very simple job for the kidneys to get rid of them.
Air hostess Nicky Bailey had her first party girl drip in December.
It is unrealistic to suppose, in a work so driven by energy and passion as Mural, that Pollock should have noticed the drips in the lower right corner.
Test your fluids to identify and segregate your drip fluid contents.
If you have to cook directly over the heat source, use a drip pan to catch the juices or cover the grill rack with foil that has holes punched in it.
In their initial experiments, they used cancer cells and found that nearly two-thirds of the proteins were apparently DRiPs.
For Krauss, what she calls "Pollock's mark" - the drips, spatters, and pours that compose his paintings - is "self-evidently horizontal.
The reason we like DRIPs investing is because anytime you have a few dollars, you can send it over to the company and it gets invested in your account with the companies you've chosen, whether it's a whole share or a quarter of a share," says Nelson.
When water drips from a faucet, it initially bulges into an elongated, hanging drop.
Trading stocks through dividend reinvestment plans is especially tough since DRIPs are not really structured for frequent trading.
For example, companies such as AT&T (NYSE:T) and Wendy's International (NYSE: WEN), just to name two, offer DSPPs and DRIPs to investors.