DRIP Investing, Step by Step

Brokerage DRIPs

Many brokerage firms advertise free "dividend reinvestment" services for account holders. These plans are often known as "synthetic DRIPs."

There is one big difference between a brokerage DRIP and a company-sponsored DRIP, though. Company DRIPs allow account holders to purchase additional shares at little or no commission. On the other hand, few brokers are willing to waive their commissions for account holders. While they may reinvest dividends for you at no cost, you'll have to pay a commission if you want to acquire more shares.

Some firms will only reinvest dividends in purchases of whole shares, and not fractional shares. For the shoestring investor, you won't have the chance to see the number of shares grow over time until you own hundreds or thousands of shares.

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