What Is a Dividend Reinvestment Plan (DRIP)?

By Kristi Waterworth – Updated Jul 1, 2025 at 3:13 AM

Key Points

DRIPs allow automated reinvestment of dividends to buy more shares, growing portfolios effortlessly.
Using DRIPs prevents frequent portfolio checks, reducing panic selling during market downturns.
Compound growth via DRIPs significantly increases investment value over time without extra effort.

If you're a stock investor, you've almost certainly come across stocks that offer dividends -- and the opportunity to participate in a dividend reinvestment plan (DRIP). These plans allow investors to keep building their portfolios automatically every time a dividend is issued.

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An infographic explaining the difference between company-operated and broker-operated dividend reinvestment plans (DRIPs). — Image source: The Motley Fool.

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Shareholder

An individual or entity that owns a portion of a company's stock, entitling them to a share of its profits and assets.

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This is a great opportunity for investors who tend to be more hands-off to continue growing their portfolios without taking anything from them or even looking at them. The system automatically buys more stock in the company that generated a dividend, allowing you to simply check your allocations a few times a year to make sure you're happy with your portfolio composition.

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About the Author

Kristi Waterworth has been a contributing real estate and financial expert at The Motley Fool, covering real estate, investing, and personal finance topics, since 2020. Kristi has been interviewed by various TV media outlets and podcasts for her real estate investing expertise – from residential real estate to digital real estate and everything in between. Kristi’s journalist career spans over 25 years, and she has written about real estate investing, homeownership, and home construction specifically for the last decade. She was also previously a licensed Realtor and general building contractor before the Great Recession and housing market collapse. She holds a bachelor’s degree in American history from Columbia College in Missouri.

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