Cash Dividend Reinvestments
If you authorize your dividends to be reinvested—which you should do unless you really need the cash—new shares will be bought in a process similar to new cash investments. Most people who set up a DRIP account do so because dividends can be reinvested at little or no cost.
After a dividend is paid, don’t expect to see new shares in your account immediately. Since companies often have to buy the new shares on the open market using cash from the dividend payout, it can take a week or more for the shares to be deposited in your account.
When companies are buying shares using a large dividend payout, they can negatively influence the stock price if they try to buy too many shares on the same day. For ...