Treasury DRIP

AAA

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%.

INVESTOPEDIA EXPLAINS '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

RELATED TERMS
  1. Dividend

    A distribution of a portion of a company's earnings, decided ...
  2. Treasury Stock (Treasury Shares)

    The portion of shares that a company keeps in their own treasury. ...
  3. Dividend Rollover Plan

    An investment strategy in which a dividend-paying stock is purchased ...
  4. Dividend Reinvestment Plan - DRIP

    A plan offered by a corporation that allows investors to reinvest ...
  5. Target Payout Ratio

    A target payout ratio is a measure of what size a company's dividends ...
  6. Accelerated Dividend

    Special dividends paid by a company ahead of an imminent change ...
RELATED FAQS
  1. Which stocks in the industrial sector pay the highest dividends?

    In the industrial sector, some of the companies that pay the highest dividends include Highway Holdings Limited, OCI Partners ... Read Full Answer >>
  2. How is a corporate bond taxed?

    A corporate bond is taxed through the interest earned on the bond, through capital gains or losses earned in the early sale ... Read Full Answer >>
  3. How are new exchange traded funds (ETFs) created?

    The creation and structure of exchange-traded funds (ETFs) are similar to that of mutual funds. An ETF serves as a portfolio ... Read Full Answer >>
  4. What is the correlation between a coupon rate and the convexity of a given bond?

    Generally speaking, convexity decreases as yields increase (geometrically, the yield curve tends to flatten at higher yields). ... Read Full Answer >>
  5. For what types of investments is the payout ratio the most relevant?

    The payout ratio is most relevant for investments that pay out dividends to shareholders. The payout ratio indicates the ... Read Full Answer >>
  6. Which stocks in the wholesale sector pay the highest dividends?

    The wholesale sector consists of a diverse group of companies that operate in industries including auto parts, industrial ... Read Full Answer >>
Related Articles
  1. Investing Basics

    How And Why Do Companies Pay Dividends?

    If a company decides to pay dividends, it will choose one of three approaches: residual, stability or hybrid policies. Which a company chooses can determine how profitable its dividend payments ...
  2. Bonds & Fixed Income

    What Are Corporate Actions?

    Be a savvy investor - learn how corporate actions affect you as a shareholder.
  3. Fundamental Analysis

    Why Dividends Matter

    Seven words that are music to investors' ears? "The dividend check is in the mail."
  4. Markets

    Your Dividend Payout: Can You Count On It?

    We go over several telling factors that can help you answer this question and avoid losses.
  5. Investing

    The Strong Dollar’s (Real) Toll On Tech Stocks

    A large portion of U.S. technology companies’ sales occur overseas, given the strong international business and consumer demand from many U.S. tech firms.
  6. Mutual Funds & ETFs

    Why You May Want To Be (And Stay) In Bonds

    Bonds are complicated, and it’s easy to feel intimidated or confused. Fortunately, you don’t need to be a numbers geek to be an informed investor.
  7. Economics

    The Big Chill: What’s Wrong With The U.S. Consumer

    Based on the most recent April data, investors may, once again, be disappointed when the second-quarter gross domestic product (GDP) report comes in.
  8. Mutual Funds & ETFs

    5 Dividend ETFs with Growth Potential

    A quick look at a few ETFs with substantial growth potential.
  9. Investing

    Where Dividend Investors Are Seeking Income

    Dividend investors are turning to sectors such as health care, technology and financial services where the earnings seem strong and the Fed seems distant.
  10. Professionals

    With Rates Low, Where Can Advisors Find Yield?

    There are many different options — both conventional and unconventional — available for financial advisors seeking yield and alpha for their clients.

You May Also Like

Hot Definitions
  1. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  2. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  3. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  4. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  5. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  6. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
Trading Center