What is Dividend reinvestment?
Dividend reinvestment means using each dividend to buy more shares of the same investment instead of taking the cash. Many brokerages and companies offer a dividend reinvestment plan, often shortened to DRIP, that does this automatically. The new shares then earn dividends of their own, which is compounding at work.
Why Dividend reinvestment matters
Over long periods, reinvested dividends can make up a large part of an investor's total return.