Dividend Reinvestment Plan (DRP): Who Qualifies and What You Get
Learn how to automatically turn your cash dividends into more company shares through a Dividend Reinvestment Plan.
A Dividend Reinvestment Plan (DRP) is a way for you to automatically use the cash dividends you earn from your shares to buy more shares in the same company instead of receiving the money in your bank account.
Who it's for
This is available to shareholders of companies that choose to participate in the plan.
What you get
Instead of receiving a cash payment, your dividends are automatically used to purchase additional shares in the company. This allows you to increase your total number of shares over time without having to manually place new buy orders.
What it costs you
Using this plan is usually free of brokerage fees, meaning you do not pay the standard transaction costs typically associated with buying shares on the market.
The catch to know
While it is a simple way to grow your holdings, using a DRP can make your Capital Gains Tax (CGT) calculations more complex. Because you are acquiring new shares at different times and prices, you will need to keep careful records to determine your cost-base for tax purposes when you eventually sell them.
How to apply
- Check if the company you own shares in offers a DRP.
- Review the company's specific terms and conditions for the plan.
- Opt-in through your share registry or the company's investor relations portal.