How to Set Up a DRIP (Dividend Reinvestment Plan) in Bangladesh

Introduction: Building Wealth with DRIPs in Bangladesh

Dividend Reinvestment Plans (DRIPs) are among the most effective tools for long-term investors who want to maximize returns through compounding and sustained portfolio growth. While DRIPs are widely used in developed markets like the U.S. or UK, interest in DRIPs is growing among Bangladeshi retail investors, especially with the expansion of online trading and financial literacy programs.

This blog explores how DRIPs work, their benefits and limitations, and how investors in Bangladesh can set one up through the Dhaka Stock Exchange (DSE), Central Depository Bangladesh Limited (CDBL), or private brokerage houses Bangladesh-Agent.com.

What is a DRIP?

A Dividend Reinvestment Plan (DRIP) allows investors to automatically reinvest the cash dividends they earn from a stock into additional shares of the same company, rather than taking the payout as cash. Over time, this strategy promotes:

• Compounding growth

• Cost averaging (buying more shares when prices are low)

• Increased shareholding without extra effort

In Bangladesh, DRIPs are not yet as standardized or automatic as in Western countries, but investors can replicate DRIP strategies manually or semi-automatically through brokers and custodians.

Why Use a DRIP in Bangladesh?

Bangladesh’s stock market is dividend-heavy, particularly among blue-chip companies such as Grameenphone, BATBC, Square Pharmaceuticals, and Renata Ltd. These companies consistently offer high dividend yields (5–12%), making them perfect candidates for DRIP strategies.

Key Advantages of DRIPs:

✅ Automatic Wealth Building
Reinvesting allows your portfolio to grow without needing to allocate new capital.

✅ No Emotional Decisions
Investors avoid timing the market or hesitating during volatility.

✅ Low or No Commission
Many brokers offer DRIP-like options with zero or low transaction fees.

✅ Ideal for Long-Term Investors
Young or patient investors can benefit immensely from decades of compounding.

🡪 Learn more: Top 5 Stocks to Watch in Bangladesh This Year

How to Set Up a DRIP in Bangladesh

Here is a step-by-step guide to setting up a DRIP-style investment strategy in Bangladesh:

Step 1: Open a BO (Beneficiary Owner) Account

To participate in the stock market, you must first open a BO account with a brokerage firm or bank that is a member of Central Depository Bangladesh Limited (CDBL).

Some trusted BO account providers:

• LankaBangla Securities

• IDLC Investments

• BRAC EPL Stock Brokerage

• EBL Securities

Ensure the broker provides online trading and reinvestment support.

Step 2: Choose Dividend-Paying Stocks

Look for companies with:

• Strong financials

• A long history of paying dividends

• Low debt-to-equity ratios

• High return on equity (ROE)

Example stocks in Bangladesh known for dividends:

• Grameenphone (GP)

• British American Tobacco Bangladesh (BATBC)

• Square Pharma

• Renata Ltd

• Berger Paints Bangladesh

🡪 Explore: What Does an Export Agent Do in Bangladesh?

Step 3: Opt for Manual or Broker-Supported DRIPs

Currently, Bangladesh does not have official DRIP infrastructure like in the U.S., so you have two options:

✅ Broker-Supported DRIPs

Some brokers allow:

• Automatic reinvestment of dividends as new share purchases

• Zero brokerage fees for reinvested shares

Confirm with your brokerage whether they offer “fractional reinvestment” or only reinvest in full shares.

✅ Manual DRIPs

You receive dividends in cash, and manually repurchase more shares via your trading account. This method allows more flexibility, especially when diversifying across multiple companies.

Step 4: Monitor and Rebalance

While DRIPs are passive, it’s important to:

• Monitor quarterly dividend declarations

• Reinvest only in fundamentally strong companies

• Adjust the portfolio if dividend payouts decline or company performance deteriorates

Taxation on DRIPs in Bangladesh

It’s crucial to understand the tax implications of dividends and reinvestments:

• Dividend Tax: 10% tax is deducted at source on dividend income

• Capital Gains Tax: Currently 15% for companies and 10% for individuals on gains over BDT 50,000 per year (rules may vary based on holding period and account type)

Note: Even if you reinvest dividends, the tax is applicable at the time of receipt.

🡪 Learn more: Remittances and Forex Stability in 2025

Challenges of DRIP Implementation in Bangladesh

Despite the benefits, DRIP strategies in Bangladesh come with challenges:

• Lack of automation: Few brokers offer full-featured DRIP tools.

• Limited fractional share purchases: Reinvestment must typically be in whole shares.

• Low awareness: Many retail investors are unaware of DRIP strategies.

• Market volatility: Dividends can be inconsistent in poorly governed companies.

However, with increasing demand for smart investing and fintech adoption, these barriers are expected to reduce over the next few years.

Who Should Use a DRIP Strategy?

DRIP investing is ideal for:

• Young professionals and first-time investors

• Dividend-seeking retirees looking for passive income

• Investors with long-term goals like education funds or retirement planning

• Anyone looking to invest consistently and grow wealth gradually

🡪 Related post: How Technology Is Changing the Labor Market

Final Thoughts

DRIPs are a smart, long-term investing strategy that works especially well in dividend-rich markets like Bangladesh. Although full DRIP automation is not yet widely available locally, you can still implement a highly effective plan using brokerage services and strategic stock selection.

As Bangladesh’s capital market matures and more digital tools emerge, expect DRIPs to become more accessible for all types of investors. For now, pairing financial discipline with good advice from investment agents or brokers is key.

🡪 Looking for professional help to build your dividend portfolio?
Contact Bangladesh-Agent.com to connect with vetted stock market agents, financial planners, and investment advisors in Bangladesh.