Legal Definitions - reinvested dividend

Definition: A reinvested dividend is a portion of a company's earnings or profits that is used to purchase additional shares in the corporation, instead of being taken in cash by the shareholder.

Example: If a shareholder owns 100 shares of a company and the company declares a dividend of $1 per share, the shareholder would receive $100 in cash if they choose to take the dividend. However, if the shareholder chooses to reinvest the dividend, the company would use that $100 to purchase additional shares of the company's stock on behalf of the shareholder. This would increase the shareholder's ownership in the company without the need for them to invest additional funds.

Explanation: Reinvesting dividends can be a smart strategy for long-term investors who want to increase their ownership in a company without having to invest additional funds. By reinvesting dividends, shareholders can take advantage of compound interest and potentially see greater returns over time. However, it's important to note that reinvested dividends are still subject to taxes, even though the shareholder doesn't receive the cash directly.