The power of DRIPs - MoneySense

The power of DRIPs

Watch your investments grow as your dividends keep on compounding

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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.

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