Dividend Reinvest Plan (DRIP)
Most dividends are paid out in cash. A company will send you a check. But if you do not need it right away, and you believe in the company, an excellent way to increase your portfolio is a program called DRIP, which stands for Dividend Reinvestment Plan. This is also called automatic dividend reinvestment. With this program you use your dividend check to buy additional shares in the company, i.e. reinvest. In most programs you can also receive a fractional share, if the dividend does not cover the cost of a full share. Generally you have to purchase the stock first to qualify for the DRIP. To enroll you have to contact the company, either by mail or on their web site. Typically this means completing an application and returning the completed form to the company. People who use this program are generally in it for the long haul, a minimum of five years. Some DRIP’s have minimum or maximum purchase requirements, so check the programs out before you sign up.