Direct investment in companies listed on the Stock Exchange
DRIP – What is it and how can you use your investment?
DRIP is an acronym for the dividend reinvestment plan. When an investor is registered under the Scheme, the dividends of the Shares will not be paid to the Holder. They are used to purchase additional shares in the company. These additions also generate dividends and produce a multiplier effect over a period of time. This coupled with the possibility of capital appreciation will ensure a greater overall return. Investment costs, the purchase of shares is also very low or not. Let's say you have invested $ 7,000 (100 shares, $ 70 per share) under the DRIP program to the pharmaceutical giant. The company pays $ 1.60 a year in dividends. Dividends are paid quarterly. $ 0.40 per quarter. Each quarter, there will be a $ 40 return. The company will buy a fractional stock and add it to your hold. At the end of the quarter, your holdings will increase from 100 to 100.5. This will be done in each quarter. Usually, you can not buy 0.5 shares or 1 share because you need to pay a commission to the broker between $ 7 and $ 29. This is the real savings. The stock is bought and added to your holdings – in any case free of charge
You can also look at the possibility of buying stocks directly from the company. Some companies offer. You can save brokers, etc., and register reinvestment plans. Another strategy may be to invest a small amount of money each month in a good company share. This may be $ 50 per month or $ 100, and then move on to the reinvestment plan. Costs and costs, in the long run, reducing revenue. Use of a good DRIP plan will reduce or eliminate this situation.
Many companies require shares to be registered in your name.
Like any investment, always consult a professional,