Business Glossary

automatic reinvestment of shareholder dividends in more shares of the company's stock. Some companies absorb most or all of the applicable brokerage fees, and some also discount the stock price. Dividend reinvestment plans allow shareholders to accumulate capital over the long term using dollar cost averaging . For corporations, dividend reinvestment plans are a means of raising capital funds without the flotation costs of a new issue .

automatic reinvestment of shareholder dividends in more shares of the company's stock. Reinvested dividends are taxable when credited to the taxpayer's account, even though no cash is received. The reinvested dividends also increase the taxpayer's basis in the stock, so it is important to retain all records for calculation of gain or loss upon sale.