Dividend Reinvestment Plan

Under a dividend reinvestment plan (also known as a DRIP or a DRP), investors receive stock dividends in the form of additional shares in a company rather than as a cash payment. Investors who participate in a dividend reinvestment plan receive quarterly notification of new shares purchased. A dividend reinvestment plan is a convenient way for an investor to accumulate additional shares of a company on a regular basis. There are several advantages to participating in a dividend reinvestment plan; stock purchase fees are often lower or may be waved entirely and some companies offer stock at a discount to investors who participate in their dividend reinvestment plan. The value of stock received though a dividend reinvestment plan is fully taxable. A dividend reinvestment plan may also be called automatic dividend reinvestment.