Understanding how DRIPs work Under DRIP, the company gives any cash dividends that investors would have received to a bank, which acts as a trustee. The bank then uses the money to repurchase the company's stock on the open stock market. The bank allocates the shares purchased to the participating shareholders' accounts on a pro rata basis. levels of participation in a DRIP suggest that shareholders would be better served if the firm reduced its cash dividends. Why do firms use DRIPs?