Treasury DRIP

DEFINITION of 'Treasury DRIP'

A dividend reinvestment plan that uses dividends to purchase more shares directly from the company's treasury stock. Oftentimes, because the company is issuing the shares, it will offer the shareholder a small discount on the share price; this discount typically ranges from 2-4%.

BREAKING DOWN 'Treasury DRIP'

The other common type of dividend reinvestment plan is the market DRIP. In a market drip, a company uses its cash dividends to purchase shares on the open market, rather than from its treasury. Using a DRIP can help companies to develop investor loyalty and a stable shareholder base. The advantages to shareholders include convenience and a lack of commission charges on acquiring new shares through a DRIP program

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