What is DRIP and how does it benefit your portfolio.

DRIP stands for Dividend Re-Investment Policy.

Most brokers have some form of DRIP built into the their investing program. You should call your broker to see what assets you own are available for DRIP.

The DRIP is an incredibly powerful tool that will allow you to compound your wealth overtime without taking on any more risks.

How this works is rather simple and can be broken down into two four steps.

  1. Invest in dividend stock.
  2. Start DRIP on stock.
  3. Let time pass.
  4. Eventually either sell the investment or disable DRIP.

I’m going to show you how each of these steps are done and how you can become a millionaire by not doing anything.

Let’s jump right in.

Table of Contents

    Invest in dividend producing stock.

    There are thousands of dividend producing stocks you can invest in. Essentially a dividend producing stock is an asset that will pay you over time without taking away from the initial investment.

    Think of it as a rental property or business that passively generates and compounds wealth.

    Each of these dividend stocks will passively bring in money. The point here is to have the DRIP slowly re-invest back into the security. The next time that your stock pays a dividend you will get more money, and you reinvest it.

    One of the best ways to get stable dividend returns is to invest in REITS. These stocks are companies that invest in real-estate and pay out a high dividend to their shareholders.

    One that I covered in a research post is Gladstone Land Corporation with the ticker LAND.

    LAND stock analysis: Going long on LAND

    Owning a stock such as LAND will net you a dividend that can then be reinvested into LAND.

    Start DRIP on stock

    Starting the DRIP on a dividend stock is much easier then you think.

    You simply need to contact your broker and tell them that you want to open a DRIP account on your portfolio. Then you need to select what securities (stocks) you want to have reinvested in and what percentage.

    The Broker in turn should give you a timeline horizon on when you can expect to generate one additional share at current compounding investment rate. At first this will be a very large time horizon but eventually this will turn into a torrential income producing asset.

    I use TD Ameritrade for my dividend portfolio. Within their home website they have an application that can allow you to automatically start the DRIP process and allocate what percentages to give to each stock.

    If you cant find this in your broker call them. It is their job to help you in the process.

    Let time pass

    Rome was not built in a day, neither was a good dividend portfolio.

    You are going to have to give it time to work. Start with a goal and then work backwards.

    For example if you say you want to generate $2000 a month then the you need to figure out how much capital you are going to need to make that number.

    The average dividend you can expect without having to much risk is 3-6% per year. The average of this is 4.5% so we will go with that.

    That means that you will need about $550,000 in the bank. Wow, that’s a lot.

    The good news is that you can compound up to that number pretty easy. If you can put away $100 a month then you will hit that mythical $550,000 a lot sooner.

    This is the secret to dividend investing. Putting a consistent amount of money into a DRIP account and letting it compound out of control.

    Eventually either sell investment or disable DRIP.

    The goal here is to eventually live off your investments.

    There are two ways to do that. The first is simply liquidating everything and living off your wealth until you die.

    If your investment was worth $500,000 you could pay yourself $50,000 for 10 years. If your 80 when this happens then chances are you might be able to live for the next 10 years simply off your investments.

    The other option is to take that $2,000 per month and instead of reinvesting it start pulling it out to pay for your expenses. This is where the benefits of dividend investing lie.

    We cant predict the future, what we can do however is to set ourselves up for any unforeseen circumstances. The best way to do this is to build yourself a bulwark of passive income generation.

    A lot of people do this with rental properties. I and many others do it with dividend portfolios. When your 60 years old you will be able to retire and know for a fact that you will be ok for the rest of your life.


    Building a DRIP portfolio is a vital way to generate passive income easily. The hardest part is the beginning where you only see a small return per year. This will quickly add up and can turn into a runaway snowball of passive income.

    If done properly you could see yourself making hundreds of thousands DRIP cash by the time you are in your 60’s. Steps taken today can easily set you up for the rest of your life.