What is a DRIP? Dividend Reinvestment Explained
A DRIP (Dividend Reinvestment Plan) takes your cash dividends and automatically buys more shares — usually commission-free and in fractional amounts. Set it and forget it.
How a DRIP works
Instead of cash hitting your account, dividends get reinvested into more shares the day they're paid.
Those new shares earn dividends too, which buy more shares, which earn more dividends... you get the idea. Compounding on autopilot.
Pros and cons
Pros: zero effort, no commission drag, and you're dollar-cost averaging into the stock over time.
Cons: you still owe tax on the dividends even though you didn't take cash. And you're concentrating more into one position instead of diversifying.
Is a DRIP right for you?
If you're holding quality dividend stocks for the long haul — especially in a tax-sheltered account — DRIPs are a no-brainer.
But if you need the income now, or want to rebalance into other stuff, just take the cash.
Free tool
Dividend & DRIP Calculator
Forecast your dividend income.
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This is educational content, not financial advice. Investing carries risk — you can lose money. Do your own research.