With as little as a few dollars to spare each month you too can be part of this exciting world if you participate in a company’s DRIP, and over time your investment can pay big dividends.

This Dividend Reinvestment Plan is by a publicly-traded company for its shareholders. What happens is that instead of paying out dividends the company reinvests those earnings by buying more shares in the shareholder’s name. You usually only need to own one share in a company to use their drip investment program and the service will usually be available commission free.

DRIPs are very popular, with some large companies reporting that over 50% of their shareholders are taking part in their DRIP. That’s great for the company as it provides them with a large pool of shareholders with a Buy and Hold mentality to the companies shares which helps to stabilize the companies price.

The only downside to the private investor is that investing all your money in a DRIP is going to be a bad idea from the perspective of the diversity of your portfolio. Talk to someone with experience in building a diverse share portfolio before putting a large amount of money into this otherwise handy investment vehicle.

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