And just like when dividends are reinvested, optional cash purchases are for fractional shares to 3 or 4 decimal places.ĭRIPs have become popular means of investment for a wide variety of investors as they enable them to effectively take advantage of dollar-cost averaging with income in the form of corporate dividends that the company is paying out. Low-fee or no-fee SPPs may be advantageous to enrollees as they offer a quick and cost-effective way to increase their holdings. a minimum of $25 per OCP or a maximum that cannot exceed $100,000 per year. The dollar amount of the OCP is sometimes subject to minimum and maximum limits, e.g.
An SPP allows the enrollee to make periodic optional cash purchases (OCP) of company stock. Similarly income trusts and closed-end funds, which are numerous in Canada, can offer a distribution reinvestment plan and a unit purchase plan which operate principally the same as other plans.īecause DRIPs, by their nature, encourage long-term investment rather than active trading, they tend to have a stabilizing influence on stock prices.Īlthough the name implies that reinvesting dividends is the main purpose of these plans, many companies offer a complementary share purchase plan (SPP).
#COMPARE STOCKS WITH DIVIDEND REINVESTED FREE#
Some DRIPs are free of charge for participants, while others do charge fees and/or proportional commissions.
#COMPARE STOCKS WITH DIVIDEND REINVESTED FULL#
The investor must still pay tax annually on his or her dividend income, whether it is received as cash or reinvested.ĭRIPs allow the investment return from dividends to be immediately invested for the purpose of price appreciation and compounding, without incurring brokerage fees or waiting to accumulate enough cash for a full share of stock. The investor does not receive dividends directly as cash instead, the investor's dividends are directly reinvested in the underlying equity. ( Learn how and when to remove this template message)Ī dividend reinvestment program or dividend reinvestment plan ( DRIP) is an equity investment option offered directly from the underlying company. ( January 2015) ( Learn how and when to remove this template message) Please help to improve this article by introducing more precise citations. This article includes a list of general references, but it lacks sufficient corresponding inline citations.
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