Investing term

What is DRIP?

Dividend Reinvestment Plan — automatically uses cash dividends to buy more shares of the same company.

A DRIP (Dividend Reinvestment Plan) automatically uses the cash dividends you receive to buy more shares of the same investment, often fee-free and in fractional amounts. It quietly compounds your holding — each dividend buys shares that then pay their own dividends. Over decades, reinvested dividends account for a large chunk of total stock-market returns.

For example

Instead of $40 in dividend cash, a DRIP buys you another half-share — which next quarter pays its own dividend, compounding your position over time.

DRIP is taught hands-on in Stage 8 — Corporate Actions: What Lands in Your Account.

See the lesson →

Related terms

AcquisitionOne company buys another. The bought company's shares are converted to cash, acquirer stock, or a mix at the closing price.Carve-outA parent company sells part of a subsidiary in an IPO, keeping a stake.Corporate actionAny event initiated by a company that changes its securities or distributes value to holders.Cost basisWhat you originally paid for a holding, used to calculate gains and losses when you eventually sell.
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