DIVIDEND-REINVESTMENT PLAN

dividend-reinvestment plan.A stock-purchase program that allows investors to reinvest their

dividends, and perhaps convert additional voluntary payments, into shares of the entity’s common

stock,  usu.  with  no  sales  charge,  and  sometimes  at  a  discount  from  the  stock’s  market  price.  •

Although  the  investor  never  receives  the  cash,  it  is  still  treated  as  income  to  the  investor.  An

investor  may  be  allowed  to  make  optional  cash  purchases  of  additional  stock.  —  Abbr.  DRIP;

 

brokerage-run  dividend-reinvestment  plan.A  formal  or  informal  program  managed  by  a

brokerage  and  allowing  shareholders  to  reinvest  dividends  in  a  portfolio,  often  at  no  cost.  •

Brokerage-run plans are usu. limited to dividend reinvestment.

company-run  dividend-reinvestment  plan.A  program  operated  by  a  corporation  for  its  own

shareholders. • Company-run plans may offer additional features such as IRAs.

transfer-agent-run   dividend-reinvestment   plan.A   program   administered   by   a   financial

institution  for  several companies. • An  investor  can  participate in  more than  one  DRIP  program

simultaneously and also make additional cash investments in multiple companies. [Blacks Law 8th]