A dividend reinvestment plan (DRIP) lets you automatically reinvest dividends by buying more shares without paying a commission. DRIPs tend to be offered by larger, well-established companies with a history of paying dividends. Check a company’s website to find out if they offer a DRIP. You can enrol yourself in the plan through the company’s transfer agent, or your investment firm may be able to do this for you.
3 advantages of a DRIP
- You can usually buy the extra shares for less than their current price.
- You can avoid paying a commission.
- You can reinvest small amounts, often as little as $10.