How does a DRIP work?
It allows shareholders of participating companies to use their cash dividends to buy more shares in their company. Rather than receiving a dividend cheque through the post or having their bank account credited with the dividend payment, shareholders in companies that operate a DRIP can choose to use their cash dividend to buy additional shares.
Whole shares are purchased with any residual money being carried forward and added to the next dividend. However, if the amount of the dividend, less any dealing costs incurred in completing the purchase, is insufficient to buy a single share no charge is made and the dividend is carried forward.