Dividend Reinvestment Plan
Abbreviation: DRIP
Plain-English definition
An arrangement that uses dividends to buy additional shares instead of delivering the dividend as spendable cash.
Why it matters
Reinvestment increases share count; it does not guarantee that later dividends or share values will rise.
Example
Ignoring fees, a $40 dividend reinvested at $20 per share purchases two shares.
How income investors use it
Check plan pricing, fees, fractional-share treatment, and whether reinvestment still fits the investment's circumstances.
This material is general education, not individualized investment, tax, or legal advice.