Final answer:
DRIPs allow investors to reinvest dividends into additional shares, sometimes at a discount, but terms vary by company.
Step-by-step explanation:
A Dividend Reinvestment Plan, commonly known as DRIP, is a program offered by companies that allows investors to reinvest their cash dividends into additional shares or fractional shares of the underlying stock on the dividend payment date. While these programs are often accompanied by advantageous terms, such as the ability to buy shares without a broker and sometimes at a discounted price, the assertion that DRIPs are specifically designed to offer common stock at a discount is misleading. In reality, the terms of a DRIP, including any potential discount, can vary significantly from one company to another. It's important for investors to review the specifics of a company's DRIP before participating.
DRIP (Dividend Reinvestment Plan) is a program offered to potential stock buyers to buy common stock at a discount price. Through a DRIP, investors can reinvest their cash dividends into additional shares of the same stock, usually at a lower price than the current market price. This allows investors to accumulate more shares over time and potentially benefit from the power of compounding.