A DRIP is one of the greatest secrets ever revealed to the small investor. A DRIP can be one of the best tools to help the individual investor's find financial success. A DRIP doesn't require a large sum of money to be invested, so almost anyone can participate. It stands for Dividend Reinvestment Plan , a program run by a publicly-traded company for its shareholders. A shareholder usually needs only one share to enroll in a company's DRIP plan, and most of the time the company will reinvest a shareholder's dividends without a fee or commission.
Some companies have DRIPs that are enormously popular with their shareholders.
Over 1,200 companies have dividend reinvestment plans for their shareholders. Companies like DRIPs for several reasons. Individuals, particularly those who are dollar cost averaging into their DRIPs, may see the drop in a stock's share price as a buying opportunity, as opposed to institutions and traders who move in and out of stocks with short-term goals in mind. This base of individual shareholders can help stabilize a company's share price. DRIPs keep capital inside the company, by not paying cash dividends outright and having those dividends reinvested in additional share purchases.