Benefits of Dividend Reinvestment Plans

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Benefits of Dividend Reinvestment Plans

The obvious advantage to dividend reinvestment plans (DRIPs) is the potential to save on brokerage commissions through direct purchases of stock from the issuing companies. Nonetheless, there are other attractive features for both investors and the corporation.

Things To Know

  • An investor usually saves brokerage fees or gets other discounts.
  • DRIPs help companies raise money inexpensively.

For Investors

An investor will usually save brokerage fees or will be offered other discounts that a corporation will provide in order to keep the investor. Furthermore, some investors may also enjoy the benefits of the option to purchase more shares in a company they already know and trust, rather than searching through the thousands of options available to them in the free market.

For the Corporation

By offering the DRIP, a corporation raises capital inexpensively. DRIPs can also help provide stability for a company’s stock price by offering perpetual demand for the company’s shares as new dividends are declared. Furthermore, the corporation may decrease or increase the availability and the benefits of its dividend reinvestment plans based on how much capital it needs to raise.

Since reinvesting your investment earnings is the quickest way to help your portfolio grow in value, it pays to check out a DRIP program if the companies you invest in offer one.