Dividend reinvestment occurs when an investor chooses to have investment dividends purchased by purchasing additional shares of the investment rather than receiving the dividends in cash or check. Investors who reinvest dividends typically seek long-term growth from their investment, such as a stock, mutual fund, or exchange-traded fund (ETF).

Dividend reinvestment is a strategy where investors use cash dividends from stocks or mutual funds to purchase additional shares instead of taking the payout as cash. This process is often facilitated through a Dividend Reinvestment Plan (DRIP), which allows for automatic reinvestment without brokerage fees.

Reinvesting dividends helps accelerate wealth accumulation through compounding, as new shares generate more dividends over time. It also allows investors to buy shares consistently, taking advantage of dollar-cost averaging. This strategy is particularly beneficial for long-term investors seeking growth. However, reinvested dividends are still taxable unless held in a tax-advantaged account. Overall, dividend reinvestment can enhance portfolio growth by increasing the number of shares owned and maximizing returns over time.