Dividend reinvestment plans (DRIPs) enable stockholders to automatically reinvest dividends received back into the stock of the

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Dividend reinvestment plans (DRIPs) enable stockholders to automatically reinvest dividends received back into the stock of the paying firm. In addition, many DRIPs allow their shareholders the option to buy more shares directly from the company by just writing a check. The major advantage is that investors are able to avoid brokerage commissions. Although some plans require small service fees, these service fees usually pale in comparison to brokerage fees; however, the specific details of DRIPs will vary from plan to plan. To learn about dividend reinvestment plans, you need to get back to basics. Let's find out what fools think about them, specifically the Motley Fool. For this cyber problem, you will be going back to school with "Motley Fool's School," found at www.fool.com/school.htm. From the "Fool's School" front page, scroll down to "Drip Investing" on the left side of your computer screen. This link will take you to the "Investing through DRIPs" section of the Fool's School. Make sure you also click on "starting a DRP" after reading the material on the first screen to answer the following questions:

a. According to the Fool, what are some of the advantages to DRIPs or DRPs, as the Fool refers to them?

b. What variation of the traditional dividend reinvestment plan does the Fool mention?

c. What effects can DRIPs have on participants' investing and consumption habits?

d. Describe the three kinds of DRIPs outlined by the Fool.

Dividend reinvestment plans (DRIPs) enable stockholders to automatically reinvest dividends

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
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Related Book For  book-img-for-question

Fundamentals of Financial Management

ISBN: 978-0324272055

10th edition

Authors: Eugene F. Brigham, Joel F. Houston

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