TUTORIALS

Dividend Reinvestment Plans

Currently, there are a lot of firms providing dividend reinvestment plants, which allows stockholders to use dividends received from the firm’s stock to obtain additional shares, even fractional shares, at a minute or sometimes no transaction cost at all.

Some companies would even permit investors to make initial purchases of the firm’s stock through the company without the help of a broker. With DRIPs, participants to such usually can have shares at about 5 percent underneath the prevailing market price.

From its point of view, the establishment can renew shares to investors more economically, preventing the underpricing and flotation costs that can occur and support the public sales of new shares. Not shadily, the whole purpose of a DRIP may improve the marketability of a company’s stock.