I recently received this question from a reader:
Hi Financial Horse,
What is your take on Distribution Reinvestment Plan? I have the option to receive either cash or shares on Mapletree Logistics.
And today, this arrived on my mail:
The coincidence tickled me so much that I felt I had to do a short post on it.
Basics: What is DRP and why are they useful?
Very simply, a distribution reinvestment plan (DRP) allows you to choose between either receiving your distribution in cash or in units (shares).
To illustrate very simply, imagine you have 1000 units in Mapletree Logistics Trust, trading at S$1 each. You receive a distribution of 5%, which works out to S$50. You can choose to either receive S$50 in cash, or 50 units (which works out to S$50).
There are a lot of financial blogs and writers out there that will