What is Dividend Reinvestment Plan?

A Dividend Reinvestment Plan (DRIP) is an equity investment option offered by an underlying company to its investors, which allows the investor's dividend payments to be reinvested in the underlying equity automatically; for example, by the purchase of additional shares or fractional shares rather than the investor receiving quarterly dividend payments directly as cash. This encourages the investment return from dividends to be immediately utilised for price appreciation and accumulating compound interest, without incurring brokerage fees.