DRIP - Value Your Business & Time

Investing in DRIPs

DRIPs are offered by public companies that help investors to increase their stake holding by reinvesting their cash dividend. Investors can elect to partake in DRIPs bypassing the middleman with no commissions and brokerage paid to third parties.

Elected investment in DRIPs often offers a discount from the market price of the company’s listed shares. These plans usually range between 2 to 3 percent discounts up to a maximum of 10 percent on reinvested dividends in some companies.

The investors who want to partake in DRIPs can either fully or partly invest in shares, the investors can partially partake in DRIP and reinvest a portion of their cash dividend but also receive cash instead.

Example:
You are shareholder owning 1000 shares in a company, and the company elects to pay a dividend of $0.75c then you would have received a cash payment of $750.00c ($0.75c*1000) if not invested in their DRIP.

On the other hand, if you had chosen to partake in the company’s DRIP offer and the purchase price was calculated at $25.00 then you would have had additional 30 shares ($750 divided by $25). Thereby, you have increased your ownership and stake in the company to 1030 shares by using the DRIP offer.

So who can invest?

Once an investor chooses to partake in a company’s DRIP, automatically at every interim or final dividend payment the dividends will be reinvested. Any listed investor that has invested in the company’s stock is in the situation to either accept cash or reinvest their dividend for further buying stock.

Younger Generations and DRIPs

DRIPs are an encouragement for the young generations of investors. A few shares in their name and the dividends received can be reinvested thus increasing their future stake holding in a company. The future stakeholder can monitor growth and thereby build his/her personal wealth and portfolio.

Example:
A gift of a small amount of share units as birthday present is given; purchasing these shares will result in further reinvesting and leash a successful drive to investments in the stock market for the future.

Why to invest in DRIP

DRIPs help investors to increase their personal wealth and to build their stake holding in companies over long periods of time.

There are several merits to investing this way:

  • DRIPs help investors to increase their personal wealth.

  • Most stock exchange listed companies help the investors to buy shares at a discounted price through their DRIP.

  • Elimination of Brokerage fees for investments in DRIPs.

  • DRIPs help the investors to invest their profit to potentially earn more profit in turn increasing the personal wealth.

  • DRIPs are excellent for long term investing plans after getting involved in particular company and perspective buy-hold strategy with this company.

  • DRIP investments compliments dollar cost averaging very well.

  • DRIPs are the easiest way to increase stake holding in a company with little effort required after the initial investment.

  • Younger generations starting to invest in shares can reap long term benefits by participating.

  • In future the investor will be able to watch the shares grow and thus further investing is possible.

Advantages of DRIP

DRIPs are the best way to get started with a long term investment planning scheme, they help to earn easily, efficiently, and effortlessly comparing to direct share purchasing.

Investing in multiple companies that offer DRIPs to ensure diversification throughout shareholding is also an option to mitigate risk.

  • Discounted stock price while purchasing DRIPS

  • Companies target DRIPs for smaller stake holding investors

  • Investors can reinvest their profit to conceivably make more profit free of cost.

  • The return on investment is higher when compared to traditional trading and mutual fund investing.

  • The investment in DRIPs benefit from no commissions and no brokerage.

  • Participation in DRIPs with multiple companies offers the benefit of diversification.