There are a number of quality S&P/ASX 300 Index (ASX: XKO) shares that give investors the opportunity to utilise their dividend reinvestment plan (DRP).
Dividends can be a way for businesses to reward shareholders by paying out a portion of the profit to investors each year.
Companies can choose to pay out most of the profit they generate, or retain a good amount of the generated profit to reinvest back into the business.
But what are investors meant to do with the dividends they receive?
I think there are three main options that investors can do with it.
First, investors could spend the dividends on something – living expenses, travel, whatever they want.
Next, shareholders could decide to receive the dividends as cash and then allocate that cash dividend towards their next share investment.
Finally, investors could decide to utilise the dividend reinvestment plans (DRP) on offer.
Benefits of a dividend reinvestment plan
A DRP allows investors to receive more shares in the business rather than receiving cash.
Buying more shares gives investors the chance of benefiting from compounding. Over time, the power of compounding can really help boost long-term wealth.
It’s automatic. Once you select the DRP option, investors don’t need to worry about what to do with the cash or when to invest. This can make things simpler.
Another benefit is that some ASX 200 shares offer discounts on the shares they issue to investors that use the DRP. For example, DRP shares could be issued at a 2% discount.
The final benefit, which is more for the business than the shareholder, is that it allows that business to keep more cash in the bank.
Ansell Limited (ASX: ANN)
Ansell is one of the ASX 200 shares that offer a DRP. This company is one of the world’s largest manufacturers of safety gloves for industrial and healthcare settings. It also sells things like protective clothing and face masks.
The Ansell share price has seen a 20% decline since mid-January 2022, so it’s now at a cheaper price.
Macquarie Group Ltd (ASX: MQG)
Macquarie is another business that has a DRP. It’s Australia’s largest investment bank and operates in a number of categories including banking and financial services, commodities and global markets, Macquarie Capital (investment banking), and asset management (Macquarie Asset Management).
Macquarie provides a 1.5% discount with its DRP, allowing investors to receive shares at a cheaper price. The Macquarie share price has fallen by around 10% since the start of 2022.
Rural Funds Group (ASX: RFF)
Rural Funds is the third business that I’m going to mention. It has a market capitalisation of more than $1 billion. The ASX 200 share owns a variety of farmland across different sectors including almonds, macadamias, vineyards, cattle, and ‘cropping’ (cotton and sugar).
The real estate investment trust (REIT) also gives investors a DRP discount, of 1.5%. Rural Funds’ share price has fallen by 5% in 2022 to date.