Although you don't receive the reinvested dividends as cash, they are still consideredtaxable incomeby the IRS (unless they are held in a tax-advantaged account, like a Roth IRA).1 Retirement Plan DRIPs If you want toset up a DRIPthat purchases more shares of the company for which you ...
or you can reinvest the dividends to buy more shares. Having a little extra cash on hand may be appealing, but reinvesting your dividends can really pay off in the long run.