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1.
Which of the following is not a benefit of a DRIP?
It pays double the regular dividend. DRIPs encourage long-term investing, and because the dividends are reinvesting regularly, investors may benefit from dollar-cost averaging. However, DRIPs respect the existing dividend rates.
2.
With a dividend reinvestment plan (DRIP) for stocks, dividends are reinvested automatically for you so that you do not need to invest them yourself.
True. This is one of their many benefits: autopilot investing.
3.
What ultimately drives price appreciation of stocks?
Anticipated dividends. Ultimately, what causes stock prices to go up is the anticipation of dividend payouts, even if investors understand that there will not be dividends for many years.
4.
Ultimately, dividends are behind capital gains.
True. The underlying reason for investors bidding up the prices of stocks is that they are valuing the dividends that the company will pay, even if those dividends do not materialize for a while.
5.
What are the two components of total return?
Dividends and capital gains. Total return includes both price appreciation (capital gains) and income (dividends).
