Dividend Reinvestment

Dividend reinvestment is the practice of automatically using dividend income received from an investment to purchase additional units or shares of the same security, rather than taking the dividend as cash. In Indian mutual funds, this was historically offered through the Dividend Reinvestment option—now renamed IDCW Reinvestment under SEBI's revised nomenclature. For equity investors, dividend reinvestment through DRIPs (Dividend Reinvestment Plans) or manual repurchase compounds returns over time by steadily increasing the shareholding. The power of reinvested dividends becomes particularly significant over long investment horizons, often accounting for a substantial portion of total equity returns.