Common stock dividends and DRIP
What iscommon stock dividends and DRIPs?
Common stock dividends and DRIPs are two ways companies can pay profit to shareholders without using cash. DRIP stands for “dividend reinvestment plan” where an investor can reinvest their dividends, putting them towards buying more stock.
Where have you heard aboutcommon stock dividends and DRIPs?
Typically, it’s bigger companies that distribute common stock dividends, however DRIPs are widely available where common stock is already issued. Even where a company doesn’t offer DRIPs directly, they can be arranged through a brokerage firm.
What you need to know aboutcommon stock dividends and DRIPs.
Common stock dividends have many benefits for investors, as they aren’t taxed until the point that they’re sold. If you don’t need to receive a return straightaway they’re a good option, however you should be wary of investing in a company that doesn’t have enough capital in the business to distribute cash dividends
Dividend reinvestment plans are more beneficial to a company than common stock dividends as they provide direct access to low-cost investment.
They’re also good for investors as they tend to be offered at a discounted share price and are commission free. DRIPs are fairly unique as they’re not limited to whole shares; shareholders can purchase fractional shares if the dividend doesn’t cover the cost of a full share.