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Dividend Reinvestment Program

A Dividend Reinvestment Plan is an equity investment option offered directly from the underlying company. The investor typically does not receive quarterly dividends directly as cash. Instead the investor's dividends are directly reinvested in the underlying equity. (It should be noted that the investor still must pay tax annually on his or her dividend income, whether it is received or reinvested.)

This allows the investment return from dividends to be immediately invested for the purpose of price appreciation (and compounding), without incurring brokerage fees or waiting to accumulate enough cash for a full share of stock. Some DRIPs are free of charge for participants, while others do charge fees and/or proportional commissions.

Although the name implies that reinvesting dividends is the main purpose of these plans, most also allow the enrollee to make additional (or optional) monthly or quarterly cash purchases of company stock, subject to minimums of $10 or more and maximums that often exceed $100,000 per year. These optional cash purchases (or OCPs) may also be commission-free and, like the dividends that are reinvested, need not be in whole-share increments, divident revestment. (Most plans allow fractional shares to 3 or 4 decimal places.)

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See also:
• Stock broker
• Low Cost broker
• Dividends
• Dividend reinvestment program

• Foreign Exchange Market
• Commodity
• Currency
• Euro
• Exchange Rate
• Foreign Exchange Options
• Currency Future
• Futures Contract
• Futures Exchange

This article is licensed under the GNU Free Documentation License.
It uses material from the Wikipedia article "Dividend Reinvestment Program".