Dividend Reinvestment Plan
Also written as: DRIP — Dividend Reinvestment Plan
A program administered by a transfer agent that allows shareholders to automatically reinvest cash dividends into additional shares of the issuing company, often at a discount and without brokerage commissions.
Full Definition
A Dividend Reinvestment Plan (DRIP) is a company-sponsored program, administered by the transfer agent, through which shareholders elect to have their cash dividends automatically used to purchase additional shares rather than receive a cash payment. DRIPs may offer shares at a discount to market price and typically do not charge commissions. Some plans also allow optional cash purchases. The transfer agent handles enrollment, fractional share accounting, and IRS reporting. In editorial copy, the abbreviation 'DRIP' is acceptable after first use; 'dividend reinvestment program' and 'dividend reinvestment plan' are used interchangeably in practice, though 'plan' is more common in formal filings.
Usage
Usage note: Spell out at first mention: 'Dividend Reinvestment Plan (DRIP).' Use 'plan' not 'program' in formal filings unless the issuer's governing documents specify otherwise.
In Context
- "Shareholders enrolled in the Dividend Reinvestment Plan will have their quarterly dividends automatically converted into additional shares." — DRIP Enrollment Form
- "The prospectus supplement described the terms of the Dividend Reinvestment Plan, including the applicable discount rate." — Prospectus Supplement