What is Drip Investing?

Becoming an investor in high dividend paying stocks can be an effective strategy. But there is one way to get even more out of the dividends that an investment gives off.

This method is called drip investing and actually lets an investor put the money that they receive from the dividends back into the stock. This way the investor can make even more money because instead of simply getting the dividends deposited into their account they can reinvest it and benefit from the compound interest that it gives off.

So how does drip investing work? If an investor wants to take advantages of this strategy they must buy the stock of a company that offers a drip investing program and that stock must be in the investor’s name.

Once they own a share of stock they will be able to enroll in the drip investment plan with the company. The dividends can also buy stock direct from company. This helps an investor to get around having to pay any broker fees for getting new shares.

One other great thing about this program is that investors do not have to have to be able to buy an additional share to take advantage of owning more of the company. Instead they will be able to buy a percentage of the stock with the dividend they recieve.

So if you get enough dividends to buy 1/3 of a share of stock the plan will automatically buy 1/3 of a share of that stock without waiting for more money to be invested into it.

Once the investor is ready to sell their stock, they must sell it back to the company. This can help to avoid any confusion of owning small percentages of stocks.

Usually if you invest in dividend and the company has a drip investing plan it can be many times more profitable then investing into the stock without the program.