When you invest in a company, or purchase shares of a publicly traded company, you become a shareholder. With this prestigious title, you’re also entitled to a cut of the profits as a reward for buying shares. This pay-out is known as a dividend, and is usually quoted in dollars per share.
Dividend re-investment means these cash pay-outs are automatically re-invested to purchase additional shares. The main advantage of re-investing dividends is maximising the benefits of compound interest instead of leaving cash idle in your account.