The power of DRIPs

Watch your investments grow as your dividends keep on compounding



From the September/October 2011 issue of the magazine.


Want to harness the power of compounding? Enroll in a dividend reinvestment plan (DRIP), where your dividends are automatically reinvested in more shares, instead of being paid out in cash.

As the purple line in the chart below shows, one share of BMO had a stock split-adjusted price of $7.28 at the end of 1990, and was worth $57.48 two decades later. If you took the dividends in cash and they grew at 1%, you’d have an additional $29.54, for a total of $87.02. The red line, however, shows the results if you had reinvested those dividends using a DRIP: after 20 years, your investment would be worth a sweet $128.42.

One comment on “The power of DRIPs

  1. Buy good blue chipper and let it compound like a mortgage. Every young investor should make it one of their first stock investments. Buy it in your TFSA and let it ride. You make money in up or down markets and the return continues to increase year after year. Use the common selection criteria such as past history of steady dividend payments with year over year increases and you are well on your way to a healthy portfolio.


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