DRIP
Dividend Reinvestment Plan -- a brokerage or company-sponsored program that automatically uses each cash dividend to buy additional fractional shares of the same stock at the post-dividend price. DRIPs compound mechanically: each reinvested dividend buys shares, those new shares earn the next dividend, and so on. Each reinvestment is a new tax lot with its own cost basis and holding-period clock, which complicates eventual sales slightly but is otherwise the cleanest possible compounding mechanism for income-paying stocks.
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Related terms
Active Management · Active Share · AI Revenue · Anchoring Bias · Cost of Capital · Creation Unit
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