How Do You Invest in DRIPS?


Quick Answer

Dividend Reinvestment Plans, known as DRIPs, allow investors to reinvest any or all dividends earned to buy more shares of that stock. Companies that pay dividends offer the plans to individuals who currently own shares of their stock.

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Full Answer

When companies pay dividends, they issue checks to shareholders who are free to use the money in any way. However, DRIPs automatically reinvest the money from a dividend payout into additional shares of stock. Only companies that pay dividends on their shares of stock offer DRIPs. Investors cannot set up a plan through a bank or brokerage house. Brokers do offer information about dividend paying companies that offer DRIPs.

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