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Dividend reinvestment plan |
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Dividend reinvestment planA plan which allows private investors to reinvest cash dividends from their investments cheaply and easily back into the market, and so obtain the benefits of compounding.The Plan is managed by an administrator appointed by the company. On the dividend date, shareholders who join the plan are still paid the cash dividend, but the administrator then uses the cash to buy shares in the company on behalf of the shareholder. Any cash left over is sent to the shareholder in the normal way. Dealing commission on such purchases is usually 1%. Note that the Plan Administrator does not have to make the plan available for any and every dividend that the company pays. If it is not made available, shareholders will receive the cash dividend.Similar MatchesReinvestment effectReinvestment effectThe impact of a change in interest rates on the reinvestment rate. Reinvestment riskReinvestment riskThe risk that proceeds received in the future may have to be reinvested at a lower potential interest rate. ReinvestmentReinvestmentUse of investment income to buy additional securities. Many mutual fund companies and investment services offer the automatic reinvestment of dividends and capital gains distributions as an option investors. Automatic reinvestmentAutomatic reinvestmentSee: Constant dollar plan. Reinvestment rateReinvestment rateThe rate at which an investor assumes interest payments made on a debt security can be reinvested over the life of that security. Further SuggestionsCommunity Reinvestment Act (CRA) |
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