In a DRIP plan, instead of receiving that small dividend check at the end of every financial period, the company reinvests the dividend payout and buys more shares in a DRIP plan.
A dividend is a return to shareholders on their investment. It’s usually in the form of cash payment that can be paid through check or deposited directly to the shareholder’s account.
Cons of DRIP Stock Investing
Taxation. Dividends are considered taxable income. Even if you reinvest your dividends before they hit your bank account, they will still be reported to the IRS as income.
How to Start DRIP Stock Investing?
You can then get in touch with a broker to find out if they have a DRIP investment program. A transfer agent usually handles the DRIP account.