Investing Basics

What Is a DRIP?

A dividend reinvestment plan (DRIP) automatically uses cash dividends to buy additional shares, often including fractional shares, of the same stock or fund instead of paying the dividends out. Over time this increases the number of shares held, so future dividends are paid on a larger holding.

Taxes

In the United States, reinvested dividends are generally still taxable in the year they are paid, and each reinvestment adds to the cost basis.

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🔗 Related Terms

Dividend Compound Interest Cost Basis Dividend Yield

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Last updated: September 27, 2026. This definition is for general educational purposes only. It is not financial, investment, tax, legal, or medical advice, and it does not recommend any product or course of action. For decisions about your own situation, consult a qualified professional.