What is Dividend Reinvestment?

There are many terms used in the context of investing, and understanding how each of these could influence your strategy is very beneficial. Reinvestment refers to when income distributions taken out of an investment are put right back into that investment instead of accepting cash. If you’re able to do this, you can see your investments grow more quickly. It’s always wise to talk about reinvestment strategies with your investment professional to determine how this could work for your long-term savings goals.

Reinvestment is one of the best ways to increase your mutual fund, exchange traded fund or stock value over time. You can reuse the money you’ve received as dividends to buy more shares or units of that same individual investment. A dividend reinvestment plan may also be referred to as a DRIP. This gives you the chance to reinvest your proceeds into more shares of the same investment. Corporations frequently offer dividend reinvestment plans but you can also find them from real estate investment trusts and master limited partnerships.

If you invest in a stock that is traded on any public exchange, your brokerage platform elections will determine whether or not you have been entered into a dividend reinvestment plan. Remember that at any time over the duration of your investment, you can usually change your election with the brokerage firm directly. If you’re not sure whether or not this is currently active in your own strategy, set aside a time to meet with our team of qualified professionals to discuss your next steps. We’re here to help you develop a holistic and effective financial plan for your goals.