You have the ability to buy partial shares.You’re putting your money into the market as quickly as possible which allows you the best chance to maximize your gains.You’re going to be making four purchases every year, once every quarter, that will help smooth out the fluctuation in the market price.When you DRIP your investments, you’re dollar-cost averaging future investments in the company every time that the dividend is paid, which is usually on a quarterly basis.But when you DRIP your investments, there areĪ lot of unwritten values that you receive. Your dividend payment, you are getting $50 of value. See below:Īt face value, yes, either way that you choose to receive So, now your total position for this stock would be 50.5 shares. ($50 payment/$100 share price = ½ share). Pays a $1 dividend, then you could either get a $50 check or you could DRIP itĮssence, that $50 dividend payment would net you another ½ share of the company Imagine that you own 50 shares of a company that’s currently Let me help explain this with an example. In essence, when you receive a dividend payment from owningĪ stock, you can either receive that as a cash payment or you can have it DRIP DRIP, or Dividend Reinvestment Plan, is really a pretty simple concept. I mean, Andrew is the (self-proclaimed) DRIP King lol. If you have ever listened to any of the Investing for Beginners podcast episodes, then you likely have heard from Andrew or Dave about the value of dividend reinvestment and DRIP. In this post, contributor Andy Shuler introduces a simple dividend reinvestment calculator to roughly estimate how much return to expect from a given dividend reinvestment rate and starting yield, so that you can make these determinations for yourself and your financial planning. As investors, it’s great to be able to know what to expect from those returns when planning for the future. One of the most powerful forces behind building wealth in the stock market comes from the compounding effects of reinvested dividends.
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