Dividend Reinvestment Plan (DRIP) stocks are companies that allow investors to automatically reinvest dividends into additional shares, often at little or no commission. By reinvesting dividends instead of taking them as cash, investors can compound their wealth over time without the need for manual trades. Many DRIP programs also allow for the purchase of fractional shares, ensuring every dividend dollar is put to work.

Pros of DRIP stocks

• Automatic compounding: Reinvested dividends buy more shares, which then generate future dividends.
• Dollar-cost averaging: Dividends are reinvested at different market prices, smoothing out volatility.
• Low-cost investing: Many DRIPs avoid brokerage fees and may offer discounts on share purchases.
• Long-term growth: Ideal for investors seeking to build wealth gradually through reinvestment rather than immediate income.

Cons of DRIP stocks

• No immediate cash flow: Dividends are reinvested, so investors seeking income won’t receive cash payouts.
• Tax obligations remain: Even reinvested dividends are generally taxable in the year received when reinvested in a taxable account.
• Concentration risk: Reinvesting dividends back into the same company can overweight a portfolio over time.

DRIP investing considerations

For dividend investors, DRIP stocks are a powerful tool for compounding. They are particularly attractive for younger investors or those still in the accumulation phase, as reinvested dividends steadily grow the share base and future income potential. Established companies with strong dividend growth track records are often popular DRIP candidates, such as Dividend Aristocrats and blue-chip dividend stocks.

While DRIP investing options may have been limited in prior decades, most major brokers now offer DRIP programs for most stocks and ETFs traded on their platforms.

Our DRIP stocks list

This stock list includes a range of NYSE and NASDAQ-listed dividend stocks that are ideal candidates for reinvesting payouts, primarily due to their established histories of rising dividends and financial stability.