DRIP is an acronym for Dividend Reinvestment Plan, and in this guide SlickBucks is going to break down and take a look at what it means, why you should consider it, and what some of the pros and cons of DRIP investing are.
If you’re already familiar with investing, you’ll know that dividends are paid out on the shares you own in a publicly traded company. This is your slice of the pie, or your share of the profits in the company you hold stock in.
While some people take their dividends every quarter and spend them, reinvesting them can be extremely profitable over the long run.
According to the DRIP model of investing you will reinvest those quarterly dividend payments into the company, provided it offers a share purchase plan (SPP), rather than taking them. These are usually automatic in nature, meaning once you set them up they run themselves.
There are pros and cons to DRIP Investing, of course. Let’s take a look at some of those now.