zpostcode
Let your cash DRIP into more shares: A guide to dividend reinvestment
Jan 5, 2026 2:48 AM

  

Let your cash DRIP into more shares: A guide to dividend reinvestment1

  When selecting stocks for your portfolio, do you concentrate on high-potential companies that seek high growth and plow every penny of profit into research and development, technology, and marketing? Or do you look for steady-as-she-goes cash cows that tend to deliver solid earnings each quarter—and pay a portion of it out to shareholders in the form of a dividend?

  Maybe the idea of dividends conjures up images of grandparents waiting for quarterly checks and using the money to fund their retirement lifestyle. News flash: Dividends aren’t just for the elderly or those who need steady investment income. And nowadays, high-growth companies such as Apple (AAPL) and Microsoft (MSFT) pay quarterly dividends.

  You might receive dividends from stocks, exchange-traded funds (ETFs), or mutual funds (in the form of distributions). If you don’t need the cash, consider reinvesting those dividends into additional shares with a dividend reinvestment plan (DRIP) to make dividend-paying stocks part of a growth strategy.

  1. Dividend reinvestment plans (DRIPs)Perhaps the most straightforward way to turn your dividend payments into additional shares is through a dividend reinvestment plan (DRIP). DRIPs are frequently offered as part of a direct stock purchase plan, and allow you to buy shares directly from a publicly held company. They are typically administered by a third-party transfer agent, such as Computershare (CMSQY) or Equiniti Group (EQN).

  If you happen to work for the company (and it offers a DRIP), enrollment is typically done through your human resources department. But if you’re looking to invest in another company’s DRIP (and not all companies offer them), the best place to start is with their website’s investor relations section. Some companies have a direct link to their stock participation enrollment page; others may place it inside their FAQs tab.

  Here’s how it works. Suppose you own 150 shares of Coca-Cola (KO), its shares are trading for $68 per share, and the company just announced a cash dividend of $0.49 per share (which comes to $73.50 for your 150 shares). The company’s transfer agent will buy you one share, plus a fraction of another share, after deducting a small transaction fee.

  The following quarter, assuming Coca-Cola pays another $0.49 dividend, you’ll earn it on 151 shares. Each quarterly dividend means more shares in your portfolio. That’s building wealth, incrementally, through the power of compounding.

  2. Opt to reinvest dividends on your accountsDo you hold stocks or stock funds (that is, ETFs or mutual funds) in a cash account at a brokerage firm—particularly one with online trading and account access? If so, you don’t need to limit your choices to companies that offer DRIPs. These days, all the top brokers offer automatic dividend reinvestment, similar to that of a company-sponsored DRIP.

  There should be a “reinvest dividends” option in your investment account preferences. Once you activate it, your broker will purchase additional shares whenever you earn enough in dividends—most likely the day after the dividend proceeds settle. You may be able to select specific stocks and ETFs for reinvestment or opt to reinvest dividends for your entire portfolio.

  Self-directed retirement accounts. If you participate in any self-directed retirement accounts (where you control the investment choices) such as a traditional or Roth IRA, simplified employee pension (SEP), or even a health savings account (HSA) with a high balance, you may have chosen some dividend-paying stocks or funds. If so, make sure the account custodian (bank, broker, or investing platform that holds the account) knows you would like to reinvest dividends.

  Company 401(k), 403(b), 457, or similar plan. Company-run retirement plans typically set dividend reinvestment as the default option. It’s all done behind the scenes, usually within the funds themselves, so the only thing you might see is—over time—higher share counts among your selected funds.

  3. Watch the dividends and buy as you goIs dividend reinvestment not available at your brokerage firm, or would you rather be your own portfolio manager? There’s never been a better time to reinvest dividends on your own. Commissions have dropped to zero for most stock and ETF purchases, and many brokers even offer fractional share purchases.

  The upside for this row-your-own-boat approach is that you can be strategic in your timing (if you so choose). The downside, of course, is that you have to pay attention. Set up notifications and/or alerts for when your stocks and funds declare (and pay) dividends, and be ready to act. Just remember a couple things:

  Dividends are not guaranteed. Occasionally, a historically solid dividend player falls on hard times and has to slash or even eliminate its quarterly dividend. General Electric (GE) and AT&T (T) are recent examples. That can be a double whammy, as it not only signals to investors that the company is retrenching, but it also forces investors who rely on dividend income (and “income” funds whose bylaws mandate investment only in dividend-paying stocks) to divest their holdings.Watch your concentration risk. If you reinvest dividends religiously each quarter, over time, you might accumulate more shares of certain stocks than others—to the point that such stocks constitute an outsize portion of your overall portfolio. Make sure you periodically review your holdings in case it’s time to rebalance. The bottom lineDepending on your stomach for risk and your investing horizon, there may be room in your portfolio for a selection of growth stocks and value stocks. If you like what a company does or makes, and you believe in its ability to deliver long-term returns on your investment, don’t automatically dismiss a dividend payer because you want profits to be plowed back into the company.

  Instead, you could take your share of the profits (which is what a dividend is, after all) and plow it back into the company yourself by buying more shares. And if you play your cards right, when it’s time to retire, you might choose to start receiving those dividends as income to fund your lifestyle. 

Comments
Welcome to zpostcode comments! Please keep conversations courteous and on-topic. To fosterproductive and respectful conversations, you may see comments from our Community Managers.
Sign up to post
Sort by
Show More Comments
Recommend >
Ayşenur Eygi
  Ayşenur Eygi Turkish-American activist Actions Share Share Share to social media Facebook X URL https://www.britannica.com/biography/Aysenur-Eygi Share Share Share to social media Facebook X URL https://www.britannica.com/biography/Aysenur-Eygi Also known as: Ayşenur Ezgi Eygi Written by Tara Ramanathan Assistant Technology Editor at Encyclopedia Britannica. Tara Ramanathan Fact-checked by The Editors of Encyclopaedia Britannica Encyclopaedia Britannica's editors oversee subject areas in which they have...
Brock Purdy
     Brock Purdy American football player Brock Purdy, 2024. (more) Brock Purdy American football player Actions Share Share Share to social media Facebook X URL https://www.britannica.com/biography/Brock-Purdy Share Share Share to social media Facebook X URL https://www.britannica.com/biography/Brock-Purdy Written by Fred Frommer Fred Frommer is a sports historian, author, and writer who has written for a host of national publications. Fred Frommer...
Stone Circles of Senegambia
     Stone Circles of Senegambia World Heritage site (more) Stone Circles of Senegambia monuments, Western Africa Actions Share Share Share to social media Facebook X URL https://www.britannica.com/topic/Stone-Circles-of-Senegambia Share Share Share to social media Facebook X URL https://www.britannica.com/topic/Stone-Circles-of-Senegambia Also known as: Senegambian Stone Circles Written by Laura Payne Laura Payne is a freelance writer whose work covers many topics. She is...
Beta, benchmarks, and risk: Measuring volatility
     How sensitive is your portfolio?© Viktor/stock.adobe.com; Photo illustration Encyclopædia Britannica, Inc.How risky might a stock or fund be relative to the broader market? That’s a question you’re likely to ask when shopping for investments to add to your portfolio. Fortunately, this is exactly what the metric called beta aims to tell you. It’s also easy to find: Just look...
Information Recommendation
Amundsen Sea
     Thwaites Glacier and Pine Island Glacier Glaciers are prominent features in West Antarctica. The Thwaites Glacier has the largest ocean front of any glacier in the world, extending roughly 75 miles (120 km). (more) Amundsen Sea sea, Southern Ocean Actions Share Share Share to social media Facebook X URL https://www.britannica.com/place/Amundsen-Sea Share Share Share to social media Facebook X URL...
Ferris wheel
     London Eye, 2016 A popular tourist destination, the London Eye is located along the River Thames in London. (more) Ferris wheel amusement ride Actions Share Share Share to social media Facebook X URL https://www.britannica.com/topic/Ferris-wheel Share Share Share to social media Facebook X URL https://www.britannica.com/topic/Ferris-wheel Also known as: observation wheel Written by Don Vaughan Don Vaughan is a freelance writer...
Anthony Mackie
     Anthony Mackie American actor Anthony Mackie, 2019. (more) Anthony Mackie American actor Actions Share Share Share to social media Facebook X URL https://www.britannica.com/biography/Anthony-Mackie Share Share Share to social media Facebook X URL https://www.britannica.com/biography/Anthony-Mackie Written by Kirk Fox Kirk Fox is a content writer who has been involved in the music scene in the Chicago area for a long time....
...
Andrew Scott
     Andrew Scott Irish actor Andrew Scott attending the 2024 Olivier Awards ceremony in London. (more) Andrew Scott Irish actor Actions Share Share Share to social media Facebook X URL https://www.britannica.com/biography/Andrew-Scott Share Share Share to social media Facebook X URL https://www.britannica.com/biography/Andrew-Scott Written by Adam Volle Adam Volle is a freelance writer and editor based in Atlanta, Georgia. Adam Volle Fact-checked...
In search of alpha: Hard to prove; hard to sustain
     It takes rare skill to capture “excess” returns.© Viktor/stock.adobe.com; Photo illustration Encyclopædia Britannica, Inc.If you’re looking to invest in an actively managed fund, you probably have one goal in mind: to beat the market. You’re looking for added value above and beyond what a passive index fund can deliver.   This added value comes in the form of a fund...
Nzinga
     Queen Nzinga Nzinga, the 17th-century queen of the Mbundu people and ruler of Ndongo and Matamba, as imagined by illustrator Achille Devéria in 1830. Lithograph by Francois Le Villain. (more) Nzinga African queen Actions Share Share Share to social media Facebook X URL https://www.britannica.com/biography/Nzinga Share Share Share to social media Facebook X URL https://www.britannica.com/biography/Nzinga Also known as: Ana de...
Tim Tebow
     Tim Tebow Former football player Tim Tebow, 2022. (more) Tim Tebow American football player Actions Share Share Share to social media Facebook X URL https://www.britannica.com/biography/Tim-Tebow Share Share Share to social media Facebook X URL https://www.britannica.com/biography/Tim-Tebow Also known as: Timothy Richard Tebow Written by Roland Martin Roland Martin is a freelance writer living in San Francisco. Roland Martin Fact-checked by...