Companies may decide to pay a portion of their earnings back to shareholders in the form a dividend. This dividend can be paid out in cash or shares. The payment of shares is known as a dividend reinvestment plan (DRP). It is not compulsory for companies to pay out dividends as they may decide to keep the funds within the company as retained earnings. As an investor you may be given a choice to take up your dividend as a …

Read MoreAdvantages and Disadvantages of a Dividend Reinvestment Plan (DRP)