Simple English definitions for legal terms
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A brokerage-run dividend-reinvestment plan is a program that allows investors to reinvest their dividends and additional voluntary payments into shares of a company's common stock. This is usually done without any sales charge and sometimes at a discount from the stock's market price. The investor never receives the cash, but it is still treated as income. The program may also allow for optional cash purchases of additional stock. Brokerage-run plans are managed by a brokerage and are usually limited to dividend reinvestment.
A brokerage-run dividend-reinvestment plan is a program that allows investors to reinvest their dividends and additional voluntary payments into shares of a company's common stock. This is usually done without any sales charge and sometimes at a discount from the stock's market price. The investor never receives the cash, but it is still treated as income to the investor. An investor may also be allowed to make optional cash purchases of additional stock.
There are three types of dividend-reinvestment plans:
For example, if an investor owns 100 shares of XYZ company and the company pays a dividend of $1 per share, the investor would receive $100 in cash. However, if the investor participates in a dividend-reinvestment plan, the $100 would be used to purchase additional shares of XYZ company's stock. This allows the investor to increase their ownership in the company without having to pay any additional fees.