What is the main advantage of a dividend reinvestment plan?
A)It increases company value.
B)It reduces transaction costs.
C)It reduces tax liability.
D)It reduces company value.

Question

Quizplus · Accepted Answer

The main advantage of a dividend reinvestment plan is that it reduces transaction costs associated with buying additional shares with cash dividends. By automatically reinvesting the dividends, the investor avoids brokerage fees or other charges that would be incurred by buying shares separately. It may also result in compounding of returns over time. The other options listed (A, C, and D) are not accurate statements about the advantages of dividend reinvestment plans.

What Is the Main Advantage of a Dividend Reinvestment Plan