Quick Finance Tip - Dividend Reinvestment Plans (DRPs) Advantages and Disadvantages

Dividend Reinvestment Plans (DRPs) advantages includes:

• Encouraging a diverse shareholder base. This is done by providing smaller shareholders an easier opportunity and means to accumulate additional shares
• Stimulate long-term investment
• Allow the company to raise new equity without the flotation cost associated with investment banks.

Dividend Reinvestment Plans (DRPs) disadvantages includes: 

• Shareholder is an additional record keeping involved in jurisdictions, in which capital gains are taxed. This is more of an administrative shortfall.