In this article I touch on three things: What are DRIPs, what are the benefits of owning them, and where do you buy them?

DRIPs are dividend reinvestment plans

The acronym "DRIP" stands for "dividend reinvestment plan." It means just what it says. The dividend that you get from a stock instead of being paid out to you is reinvested in the company that you invested in. So instead of the company paying the dividend directly to you, it instead reinvests your dividend for you back into the company itself. By doing this, the company enables you to own more company stock over time. In other words, those tiny raindrops (dividends) or "drip, drip, dropping of the rain", so to speak, eventually turn into a puddle or, in some instances, into a flood of stock ownership.

Low purchase price, average price, discounted price

There are several benefits of owning a DRIP. One benefit of owning a DRIP, a dividend reinvestment plan, is that investors can very little money or as much money as they can afford. In some cases, for instance, they can invest as little as $10 or as much as 500,000. Another benefit of owning a DRIP is that they are based on a common investment strategy known as "dollar-cost-averaging". What this means is that the price you pay for the shares of stock you purchase averages out over time. That is to say that you pay the average price of the stock. You, thus, over time, never end up paying the highest price or the lowest price for the stock. A third benefit of owning a DRIP is that you can buy shares and, in some instances, make option cash purchases of additional shares of stock at a discount. In other word, instead of paying the full price of what the stock is selling for in the market, you can that stock direct from the company at a cost that is 1% to 10% less than its market value. Not only that, you also pay no fees or commission to any broker when you purchase the discounted shares.

Invest in highly respected companies plus pay no commission

Two other benefits of owning a DRIP are the following: Your reinvested dividends enable you to buy shares or fractional shares of some of the most respected companies in the industry, for instance, Microsoft, Nike, and AT&T. And second,-and perhaps the most important reason for owning a DRIP-is that you don't have to pay any broker, whether full-service or discounted broker, any commission because you are purchasing your shares directly from the company itself.

Buy DRIP through company or agent

Now that the rabbit is out of the bag, that is to say you have not only heard about DRIPs, but also know about the many benefits of owning them, the final question, of course, is where do I go to purchase them? The answer is you can purchase them either through the company itself or through its transfer agent.

Summary

The term DRIPs, again, is an acronym for" dividend reinvestment plans". By buying a DRIP, your dividends are reinvested in the company so that you can buy additional or fractional shares of a company's stock. Among the benefits of investing in DRIPs are that you can get in on it with little money, you pay only the average price for a stock or get it at a discount from the market rate, you can purchase shares or fractional shares of great companies at extremely low prices, and you don't have to pay a commission to purchase the shares. Finally, you can buy a DRIP from the company itself or from its transfer agent,