Typically, a company will assign an investor to a transfer agent. The transfer agent is an entity that is hired by the company to administer its dividend reinvestment plan. In some cases, an investor may be able to purchase their initial shares directly from the company. Every company has specific rules that govern the minimum requirements for eligibility into a dividend reinvestment plan. Some companies may require an investor to own as little as one share to participate in the DRIP; others may require a higher number of shares. Yet other companies may assign a dollar amount (e.g. $250) as opposed to share volume.
After that, there’s nothing that an investor has to do. The dividends are automatically reinvested on whatever schedule a company pays out its dividend. For example, if a company issues a quarterly dividend, an investor would purchase new shares, or fractional shares, every 90 days.
For example, Coca-Cola (NYSE:KO) has a share price of $55.77 and pays a dividend yield of 2.87%. If an investor held 100 shares they would have an investment of $5,577. With a 2.87% yield, they would be scheduled to receive approximately $40 every quarter. This would mean that assuming the stock price and yield stayed the same, they would be purchasing almost three additional shares per year.