How to Start Investing in Dividend Reinvestment Plans

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A DRIP program allows your dividends to be invested into additional shares.
A DRIP program allows your dividends to be invested into additional shares. (Image: stocks and shares image by Andrew Brown from Fotolia.com)

Dividend Reinvestment Programs (DRIP) are equity purchase programs offered by some public companies where the normally paid dividends are directly reinvested into the shares you own. Such programs are popular with investors because they eliminate the need to use and pay for the services of stock brokerage.

Find companies that offer a DRIP program. Using your Internet connection, identify companies with a good and stable track record of paying dividends.

Go to the website of all the companies you are considering. Look under their “investor relations” section to see if they offer a DRIP program. You may need to email or call them directly.

Request the required documentation for enrolling in the program. Complete the required paperwork amd return it to the company. Arrange to purchase the required number of shares to start the program.

Monitor the activity of your account to make sure dividends are being reinvested according to your wishes.

Tips & Warnings

  • Be sure to see if there are any administrative fees that the offering company charges to administer the program.
  • An alternative to DRIP is to purchase an equity mutual fund and have dividends from the mutual fund reinvested on your behalf.

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