The dividend is under dividend reinvestment plan

Jean Folger has 15+ years of experience as a financial writer covering real estate, investing, active trading, the economy, and retirement planning. She is the co-founder of PowerZone Trading, a company that has provided programming, consulting, and strategy development services to active traders and investors since 2004. • A dividend is a reward (usually cash) that a company or fund gives to its shareholders on a per-share basis. • You can pocket the cash or reinvest the dividends to buy more shares of the company or fund. • With dividend reinvestment, you are buying more shares with the dividend that you’re paid, rather than pocketing the cash. • Reinvesting can help you build wealth, but it may not be the right choice for every investor. You may be able to avoid paying tax on dividends if you hold the dividend-paying stock or fund in a Dividends Paid on Per-Share Basis Dividends are issued to shareholders on a per-share basis. The more shares you own, the larger the dividend payment you receive. Here’s an example: Say ABC Co. has 4 million shares of As long as a company continues to thrive and your portfolio is well balanced, reinvesting dividends will benefit you more than taking the cash will. But when a company is struggling or when your portfolio becomes unbalanced, taking the cash and investing the money elsewhere may make more sense. Cash vs. Reinvested Dividends Assume ABC’s stock performs consistently and the company continues to raise its dividend rate the same...

Dividend Reinvestment Plans (also known as Dividend Reinvestment Programs, or DRIPs) are a great tool for long-term investors. The compounding interest of DRIPs allows investors to purchase additional shares of stock at little or no cost – simply reinvest the dividends, and when enough money is accrued, additional shares are automatically purchased. If an investor is enrolled in a specific stock’s DRIP plan, he/she will not receive dividend payouts in the form of cash. Instead the dividends paid will automatically buy additional shares of that company. These plans are beneficial to investors as they allow them to receive any growth from the stock as well as gains from compounding. When an investor enrolls in a dividend reinvestment plan, he/she will no longer receive dividends in the mail or directly deposited into their brokerage account. Instead, those dividends will be used to purchase additional shares of stock in the company that paid the dividend. There are over 1000 companies and closed-end-funds that have their own DRIP plans. In addition, investors can reinvest dividends from most companies through their broker. To have a company’s next dividend payout be applied to a DRIP program, you must be enrolled by the stock’s record date. To see if the stocks you own have a company-run DRIP plan, DRIP program, there’s no need to worry – most major brokerages allow investors to enroll any dividend paying stock in a DRIP plan. Enrolling in a DRIP is fairly easy. Most major b...

But what should you do with your dividends when you receive them? Should you cash them out or reinvest them? Cashing them out leads to further complexities as they may be considered qualified dividends and ordinary dividends. Understanding how dividends are categorized is key to making an informed decision on whether to • Dividends are distributions paid by companies on earnings to their investors. • Investors can choose to reinvest their dividends or take them in cash. • Cash dividends are categorized as qualified or ordinary. • Qualified dividends are taxed at lower rates than ordinary dividends, which are considered ordinary income. • Reinvested dividends are treated as if you actually received the cash and are taxed accordingly. • Capital gains distributions • Any dividends paid on deposits with • Any dividends from a • Dividends paid by a corporation on securities that an employee holds in an employee stock ownership plan maintained by the corporation • Dividends on shares of stock where the holder is required to make related payments • Dividends from foreign corporations 2022 Marginal Tax Rates Tax Rate Income Range (Single) Income Range (Married Filing Jointly) 10% $10,275 or less $20,550 or less 12% $10,276 to $41,775 $20,551 to $83,550 22% $41,776 to $89,075 $83,551 to $178,150 24% $89,076 to $170,050 $178,151 to $340,100 32% $170,051 to $215,950 $340,101 to $431,900 35% $215,951 to $539,900 $431,901 to $647,850 37% $539,900 and above $647,850 and above You can of...

Investors who own • Spend it. Use the cash to supplement your income. • Save it. Bank the money to fund a future expense. • Invest it. Combine the dividend with other payments or sources of cash to buy shares of a different company or fund. • Reinvest it. Use the money to buy more shares of the same company. Here's a look at this latter strategy to help determine if it's right for you. Image source: The Motley Fool What is dividend reinvestment? Dividend reinvestment is using the cash dividend paid by a company or fund to buy more shares of that same investment. Any investor can use this strategy since most brokerage accounts have automatic dividend reinvestment programs that automate the purchase of new shares in that same stock, exchange-traded fund ( How does dividend reinvestment work? Dividend reinvestment is a simple process. When a company pays a dividend, the broker or company uses that cash to buy more shares of the underlying investment, which is completely automated if an investor signs up for automatic dividend reinvestment or a DRIP program. As a result, instead of receiving a cash payment, an investor will get more shares of the company or fund based on the current market rate. If the dividend payment is less than the full share cost, an investor will receive Here's an example to help investors understand how dividend reinvesting works. An investor owns 100 shares of a company that pays a $1 quarterly dividend. Thus, they would receive $100. However, because ...