Dividend Reinvestment Programs
Dividend reinvestment plans are offered by corporations as a way for interested investors to accumulate shares of stock in the specific companies. Reinvestment plans can be a low-cost option for investors who want to make a long-term investment in a specific company.
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Function
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A dividend reinvestment plan allows investors to buy shares of a company's stock and have the dividends automatically reinvested into more shares of stock. Most companies will have their DRiP plan administered by a third party bank or trust company.
Potential
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Dividend reinvestment plans allow investors to make regular automatic investment into the plans as well as reinvesting any dividends paid for by the company. The costs of a DRiP plan for investing small amounts is usually less than buying shares through a broker. Reinvestment plans also allow the investment of fixed dollar amounts and the purchase of fractional shares.
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Finding Plans
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If a company offers a reinvestment plan, the details can be found through the investor relations page of the company's website. The plan will be listed under stock information or stock purchase plan. To find a listing of available plans, check the websites of the major administrators: Computershare and American Stock Transfer & Trust Company (See Resources).
Considerations
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The fees of dividend reinvestment plans vary considerably. Review the fees of any plan before you start an investment program. For most plans, you can enroll online or download an enrollment form and send it in with a check for your first investment.
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