Top up the portfolio

“DRPs are especially beneficial for investors who are in the early or growth stage of their portfolio”

Dividend reinvestment plans (DRPs) are an effective means of building wealth over time. They are a great way to boost your holding in a listed entity’s shares and they concurrently add a compounding effect to the wealth you can generate with stocks.

In fact, electing to participate in a listed company’s DRP is almost a set-and-forget way to increase your nest egg. But it is important to understand how they work from a tax perspective, as well as the different types of DRPs, and to keep your records up to date.

> How they work

In a dividend reinvestment plan, a company pays shareholders part of the profits it makes in the form of cash dividends. Dividends are generally paid each year into a shareholder’s bank account