DRIP (Dividend Reinvestment Plan)
Educational only, not financial advice.
A DRIP (dividend reinvestment plan) automatically uses cash dividends to buy more shares of the same investment, instead of paying the dividend out as cash.
Why it matters
- Reinvesting dividends compounds returns over time — each reinvested dividend can itself generate future dividends.
- Many brokerages offer DRIP as a free, automatic option for eligible stocks and ETFs.
- DRIP dividends are still generally taxable in non-registered accounts, even though you never receive the cash.
Simple example
- An investor holding a dividend ETF with DRIP enabled automatically buys a small number of additional shares (or fractional shares) each time a dividend is paid.
- Over 20-30 years, reinvested dividends can meaningfully increase total returns compared with taking dividends as cash and spending them.
How beginners use this
Reinvesting dividends compounds shares over time. Model it with the DRIP calculator.
Related terms
Learn more
Try it
Sources
- Canada Revenue Agency: Taxable amount of dividends (lines 12000 and 12010)
- Investor.gov (SEC): Compound Interest Calculator
Reviewed by Greg Parsons. Links checked October 14, 2026. Educational only, not financial advice.