Legal Definitions - DRIP

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.