Dividend Reinvestment
Quick Answer
Using dividend payments to automatically purchase additional shares of the same investment.
Definition
Using dividend payments to automatically purchase additional shares of the same investment.
Explanation
Dividend reinvestment (DRIP) is a powerful compounding strategy. Instead of taking cash, dividends buy more shares. Those new shares generate their own dividends, creating exponential growth. Most brokerages offer this free.
Reinvested dividends have historically accounted for about 40% of the S&P 500's total return over the last century.
Example
$10,000 in a stock with 6% growth + 3% dividend yield. Without reinvesting: $32,071 after 20 years. With reinvesting: $56,044 — nearly $24,000 more.
Frequently Asked Questions
What is Dividend Reinvestment?
Using dividend payments to automatically purchase additional shares of the same investment.
How does Dividend Reinvestment work?
Dividend reinvestment (DRIP) is a powerful compounding strategy. Instead of taking cash, dividends buy more shares. Those new shares generate their own dividends, creating exponential growth. Most brokerages offer this free.Reinvested dividends have historically accounted for about 40% of the S&P 500's total return over the last century.
Can you give an example of Dividend Reinvestment?
$10,000 in a stock with 6% growth + 3% dividend yield. Without reinvesting: $32,071 after 20 years. With reinvesting: $56,044 — nearly $24,000 more.
Free Excel Templates
Also try our free Dividend Income Tracker template
Track dividend payments and passive income from your investments. Monitor reinvestment and total dividends received.
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