Answered: What are dividend reinvestment plans?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter15: Distributions To Shareholders: Dividends And Repurchases

Section: Chapter Questions

Problem 9MC

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What are dividend reinvestment plans?

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Step 1

Introduction:

Usually, dividend is nothing but, sharing a portion of profits of the corporation, as determined by the board of directors of the corporation to the class of its owners. It is most commonly estimated in terms of dollar amount earned by each share (dividend per share).

Step 2

Answer:

The Dividend reinvestment plan (DRIP) is a scheme where shareholders will automatically put into their cash dividends into extra shares of the common stock of the company. The fundamental principle of investing is that if the enterprise is good enough to invest in, it is profitable enough to grow in.

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