What is a DRIP and how does it work?
A DRIP is a dividend reinvestment plan. Under these plans, shareholders can have their dividends automatically reinvested in additional shares of the company's common stock. There are two types of DRIPS. One type involves the purchase of existing stock, and the other type involves the purchase of newly issued stock. The first type of plan is executed through a bank that, acting as a trustee, purchases the stock on the open market and then allocates it on a pro rata basis to the participating shareholders. In the second type of plan, the cash dividends of the participants are used to purchase, often at a small discount (up to 5%) from the market price, newly issued shares of stock.
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What will be an ideal response?
Citation styles are limited to MLA and APA
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