LESSON 2.6 · FOUNDATION

What actually happens when a dividend is reinvested

The mechanics of turning cash back into shares, and what that does to your cost basis.

DIVIDENDS4 MIN READ

A DRIP — dividend reinvestment plan — takes each cash dividend on its payment date and buys more of the same shares with it, usually including a fraction. You were still paid; you just spent it straight away. That's reinvestment. Funds can do it internally instead: with accumulation units, the income stays inside the fund and lifts the unit price, and no cash or new units appear at all.

Each reinvestment is a new purchase at that day's price, so it adds shares and adds to your cost basis — the dividend becomes money you've put in. The app books the dividend itself automatically, but it can't see what your broker did with it: add each reinvestment as a small buy, or bring it in through your broker connection or a CSV import, so the share count and cost basis stay right.

£48 dividend£12 share price4 more shares · cost basis +£48

The cash never reaches you. It arrives as shares, and your cost basis grows with it.

Add a reinvestment to a holding →

Educational content only. It is not personal financial advice.