Distribution Reinvestment

DEFINITION of 'Distribution Reinvestment'

A process whereby the distribution from a limited partnership, real estate investment trust (REIT) or other pooled investment is automatically reinvested into common units or shares in a fund, often at a discount to the current market price. Investors can set up distribution reinvestment plans with the partnership itself, or with a broker through which the units are held.

Also known as a DRIP, but not to be confused with dividend reinvestment plans (also called DRIPs), which are found in many large-cap stocks and mutual funds. Most distributions are done quarterly, but some may occur on a monthly basis.

BREAKING DOWN 'Distribution Reinvestment'

Investors who participate in these programs also generally have commissions and other fees waived, making it an advantageous and affordable way to grow their investment. Meanwhile, the financial managers have a stable way to grow assets with current investors.

RELATED TERMS
  1. Automatic Reinvestment Plan

    An investment program in which capital gains or other income ...
  2. Dividend Reinvestment Plan - DRIP

    A plan offered by a corporation that allows investors to reinvest ...
  3. Reinvestment

    Using dividends, interest and capital gains earned in an investment ...
  4. Treasury DRIP

    A dividend reinvestment plan that uses dividends to purchase ...
  5. Reinvestment Risk

    The risk that future coupons from a bond will not be reinvested ...
  6. Cost Basis

    1. The original value of an asset for tax purposes (usually the ...
Related Articles
  1. Investing

    5 Ways to Lose Money With a Dividend Reinvestment Plan

    Enrolling in a dividend reinvestment plan can backfire if you're not using it wisely, costing you money in the process.
  2. ETFs & Mutual Funds

    How to Reinvest Dividends from ETFs

    Learn about reinvesting ETF dividends, including the benefits and drawbacks of dividend reinvestment plans (DRIPs) and manual reinvestment.
  3. Investing

    How Does a Dividend Reinvestment Plan Work?

    A dividend reinvestment plan allows investors to use their dividends to purchase more shares of the corporation’s stock, rather than receiving payment.
  4. Retirement

    Should Retirees Reinvest Their Dividends?

    Find out why dividend reinvestment may or may not be the right choice for retirees, depending on their financial needs and investment goals.
  5. Investing

    The Perks Of Dividend Reinvestment Plans

    These plans offer shareholders a way to directly invest in some of the top companies without the commissions.
  6. Markets

    What is Reinvestment Risk?

    Reinvestment risk refers to the risk that a bond’s future coupons will have to be reinvested at a lower interest rate.
  7. Retirement

    6 Reasons Why Dividends Should Be Reinvested

    Learn about the advantages of dividend reinvestment programs and how they may benefit longer-term investors who want to build a position in a company.
  8. Financial Advisor

    Got Dividends? Here's How to Reinvest Them

    Reinvesting dividends is almost always a good idea if you intend to hold your shares for the long term, and there are several ways to do it.
  9. Retirement

    Reinvesting Dividends Pays in the Long Run

    Find out why dividend reinvestment is one of the easiest ways to grow wealth, including how this tactic can increase your investment income over time.
  10. ETFs & Mutual Funds

    Reinvesting Your Mutual Fund Dividends

    Learn the benefits of reinvesting your mutual fund dividends, their impact over time, and when it is better to take the dividend payments as cash.
RELATED FAQS
  1. Do cash dividends that are no longer being reinvested affect the cost basis of my ...

  2. What effect does a company's dividend reinvestment plan have on its stock price? ...

    When a dividend is received, an investor has two options: to keep the proceeds in a bank account or reinvest them. For the ... Read Answer >>
  3. How do I deal with stocks that pay dividend on a monthly basis?

    If I own 1,000 shares of company ABC, which yields $.50 per share. That would equal to $500. So, my qu... Read Answer >>
  4. Should mutual fund dividends be reinvested?

    Learn the advantages and disadvantages, as well as the tax impact, of having your mutual fund dividends automatically reinvested ... Read Answer >>
  5. What are the dividend reinvestment options for a mutual fund?

    Learn about the options that shareholders have for dividend distributions made by mutual funds and why a shareholder may ... Read Answer >>
  6. What is a DRIP?

    The word "DRIP" is an acronym for "dividend reinvestment plan", but "DRIP" also happens to describe the way the plan works. ... Read Answer >>
Hot Definitions
  1. Put Option

    An option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security ...
  2. Frexit

    Frexit – short for "French exit" – is a French spinoff of the term Brexit, which emerged when the United Kingdom voted to ...
  3. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  4. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  5. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  6. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
Trading Center