Dividend Reinvestment Plan

A system whereby dividends on a stock are automatically reinvested in additional shares of stock, usually without fee and sometimes even at a discount.

Also known as DRIPs, dividend reinvestment plans are justly popular with investors. For one thing, they solve the problem of how to reinvest dividends, which are typically paid in cash. For another, they offer a way to increase your stock holdings at minimal expense and effort. Built into the system is a form of dollar cost averaging.

 

 

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