Dividend Reinvestment Plans (DRP) Explained
A distribution reinvestment plan or DRP is the same thing as a dividend reinvestment plan for shares.
For example, let's say you own an ETF that aims to pay 2% of your investment back to you once per year.
If you have $100 invested, instead of collecting the distribution (2% or $2) in cash to your bank account, you can log into your share registry account (or contact the ETF issuer) and, if this option is available, you can elect to take your distribution ($2) as new units in the ETF.
DRPs are not always offered by ETF issuers. Most ETFs will offer either:
- Full or partial DRPs
- Full DRPs
- Partial DRPs only
- No DRP (cash only)
You should read the PDS of your fund, visit the issuer's website or contact the ETF registry for more information.