Reinvestment

  

You collect cash from the dividends in your portfolio. But you don't need the cash. In fact, you'd rather just have more stock. So you apply a dividend reinvestment plan, wherein your dividends just go back to buy more stock, usually already-trading secondary stock from one of the brokerages that makes a market/trades in the stock you're buying, after you've set up an account with them. Or the function happens in the brokerage account in which you hold those divvy-bearing stocks.

The sad news is that your dividends will still get taxed, so you'll have to come up with cash to pay the tax, meaning that you actually lose cash each year, paying taxes on dividends you received which are taxable, and which then go back to buy more stock.

But if you're disciplined and don't need the cash, this can be a great way to goose long-term returns on your investments. By, yes...reinvesting.

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