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Simple English definitions for legal terms
DRIP
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A quick definition of DRIP:
Term: DRIP
Definition: DRIP stands for Dividend-Reinvestment Plan. It's a way for people who own stocks to automatically use the money they get from dividends to buy more shares of the same stock. This helps them grow their investment over time without having to do anything extra.
A more thorough explanation:
Definition: DRIP is an abbreviation for Dividend-Reinvestment Plan. It is a program offered by some companies that allows investors to automatically reinvest their dividends into additional shares of the company's stock.
Example: Let's say you own 100 shares of XYZ Company, and they pay a quarterly dividend of $0.50 per share. With a DRIP, instead of receiving a cash payment of $50, you would automatically reinvest that money into additional shares of XYZ Company. So, if the current stock price is $10 per share, you would receive 5 additional shares of XYZ Company.
This example illustrates how a DRIP works by showing how an investor can use their dividends to purchase more shares of a company's stock, which can help to increase their overall investment over time.