What a DRIP Is
A dividend reinvestment plan, or DRIP, automatically uses your dividend payments to buy additional shares of the same stock instead of paying the cash to you. Most brokers offer this at no cost, and many companies also run direct purchase plans that let you buy shares straight from the company, sometimes at a small discount.
The advantage is compounding without friction. Each dividend buys more shares, and each new share earns its own dividend, so the position grows on autopilot. Over decades, the reinvestment can account for a large share of total return, which is the core of Marc Lichtenfeld’s Get Rich with Dividends approach.
The Fine Print Worth Knowing
Two details matter. First, fractional shares: most DRIPs buy fractional shares, which is what makes reinvesting every penny possible. Second, cost basis: every reinvestment is a separate purchase with its own cost basis, so recordkeeping gets more complex, and if you sell, you will have many small lots to account for. That is a manageable annoyance, not a reason to avoid a DRIP.
The bigger conceptual point is that a DRIP can only reinvest what the company actually pays. That is where the “29% Account” pitch runs into reality. Texas Pacific Land pays a dividend of around 0.6 percent, so a DRIP on TPL compounds a 0.6 percent stream. The famous 29 percent return was share-price appreciation, which a DRIP does not capture. We explain that distinction in our dividend reinvestment explainer and the Texas Pacific Land breakdown.
When a DRIP Shines
A DRIP is most powerful for stocks with a meaningful yield and a long record of raising dividends, exactly the “perpetual dividend raiser” profile Lichtenfeld champions. For a low-yield compounder like TPL, the reinvestment matters less than simply owning the stock and letting the price do the work. The tool is valuable; it just cannot manufacture income a company does not pay.
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