DRIP (Dividend reinvestment programs) are one of the most classic forms of dividend investing. These programs allow you to take the dividend you are paid for owning shares of a company and reinvest those payment back into your portfolio by buying more share.
This accomplishes two major things. The stock owner will increase the number of shares they own, therefore increasing the amount they are paid in dividends each period. Also, the value of the stock the investor owns will increase each period as a result of the dividend.
How To enroll
To enroll in a Dividend reinvestment program you will need to own at least one share of the company you want to enroll with. Contact your broker to get their specific steps to enroll.
If the dividend stock you like doesn’t have a drip program consider going with a imitation drip setup like what you will find at Sharebuilder. They will take the dividend you are paid and automatically buy more shares for you.
Taxes
Dividends that are reinvested with a DRIP are still taxed like normal dividends. You don’t get off the hook for reinvesting them.
