DRIP Stock Investing: How to Collect More Stock on Autopilot

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DRIP is an acronym for Dividend Reinvestment Plan. It is an arrangement where dividends are automatically reinvested into more shares.

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When you buy dividend stocks, companies pay you periodically for holding their shares. A dividend is a way for the company to say thank you for investing in us, and dividends mostly come from the company’s profits in the previous year.

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A DRIP plan offers investors an opportunity to reinvest their cash dividend and purchase the company shares. However, they will need to buy the shares directly from the company.

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For instance, you have 1000 shares in a company that pays $1 per share in dividends. Therefore, if you enroll in a DRIP program, you will get $1000 in dividends.

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However, if we assume that the company’s stock is trading at $50 when receiving the dividend, you will be allocated an additional 20 shares instead of a dividend check.

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Dividend dripping isn’t limited to a whole share, and this is why these plans are unique. The companies keep good records of the percentage of share ownership.

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Like the words suggest, fractional shares are a fraction of a whole stock. That means you can own 1.75 of a share instead of two shares.

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Swipe Up

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