Dividend reinvestment plans give shareholders the opportunity to use the cash dividends on their shares to buy more shares in the same company. Shareholders receive as many whole shares as can be bought with their dividend, taking into account any costs of the DRIP.

DRIPs were introduced in the UK in 1997. Since then the number of companies offering DRIPs to their shareholders has grown steadily and now over a million shareholders across the UK reinvest their dividends using DRIPs rather than receiving a cash dividend.

The amount of the dividend is then used by the DRIP provider to buy additional shares in the stock market.

Shortly after the shares are purchased shareholders receive details of the transaction in a statement together with a share certificate for the shares purchased (where shares are held electronically in CREST or in a Corporate Sponsored Nominee the shares are automatically credited to the account and a share certificate will not be sent.)

The value of shares and the income, if any, from them can go down as well as up. Investments made under this agreement are in one company only and should therefore be considered as part of a balanced portfolio.