The following statements are true of dividend reinvestment plans (DRIPs):
I.They are offered by the companies to their shareholders.
II.Generally, new shares are issued at a discount.
III.The dividends are taxable as ordinary income.
A)I only
B)I and III only
C)I, II, and III
D)III only

Question

Quizplus · Accepted Answer

Dividend reinvestment plans (DRIPs) are indeed offered by companies directly to their shareholders, allowing them to reinvest dividends to purchase additional shares, often at a discount, which makes statement II true. Despite the reinvestment, the dividends are still considered taxable income by tax authorities, making statement III true as well.

The Following Statements Are True of Dividend Reinvestment Plans (DRIPs)