DRIP Stock Investing: How to Collect More Stock on Autopilot

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Do you want to reinvest your dividends without having to think about it? Then, DRIP investing may be the tool you need.

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DRIP is an acronym for Dividend Reinvestment Plan. It is an arrangement where dividends are automatically reinvested into more shares.

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What is DRIP Stock Investing? When you buy dividend stocks, companies pay you periodically for holding their shares.

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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.

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A DRIP plan can help maximize the value of your stock as you take advantage of the compounding returns, possible discounts, and dollar-cost averaging.

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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.

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Pros of DRIP Stock Investing Dollar-cost averaging. When you reinvest your dividends, what you are essentially doing is dollar-cost averaging.

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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.

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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.

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