Dividend reinvestment is a strategy where investors use the cash dividends received from their investments to purchase additional shares of the same stock or fund, rather than taking the cash. This approach allows investors to compound their returns over time, as they acquire more shares without needing to invest additional money. Many companies and investment funds offer dividend reinvestment plans (DRIPs) that automate this process. By reinvesting dividends, investors can benefit from the power of compounding, potentially increasing their overall investment value more significantly than if they simply received cash payments.