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Setting Up Your First Dividend‑Reinvestment Account

Dividend reinvestment accounts are a wealth-building powerhouse for NIL athletes. Ron McCoy, with 40+ years of fiduciary expertise, reveals how to set up your first DRIP to compound earnings and secure your financial future against lockouts.

For college athletes earning significant income from endorsement deals, sudden wealth creates both big opportunities and important financial challenges. Without a plan to turn those earnings into long-term growth, unexpected events—or career changes—can put lasting security at risk.

One simple, powerful tool for building wealth over time is a dividend reinvestment plan (DRIP). DRIPs automatically use your stock dividends to buy more shares, harnessing compounding to drive steady portfolio growth—no extra effort required.

Setting up a DRIP is a straightforward step that helps turn today’s NIL earnings into tomorrow’s financial foundation. Here’s what every NIL athlete should know about getting started and making the most of this strategy.

The Power of Dividend Reinvestment

With DRIPs, you automatically reinvest dividends into additional shares, compounding your returns over time. Most brokerages offer fee-free DRIPs, and some companies even let you buy shares at a discount. According to a 2024 Vanguard study, reinvesting dividends can boost portfolio returns by 1–2% annually—enough to double a $100K investment in 20 years (assuming 6% growth).

For NIL athletes, DRIPs create passive income and help buffer the ups and downs of endorsement income—providing steady growth, even in lockout years or after your athletic career ends. Dividend “aristocrat” companies (25+ years of increasing dividends) offer stability and long-term rewards, with typical yields of 2–4%.

Case Study: NIL Earnings to Long-Term Growth

Kayla, a college volleyball standout, earned strong NIL income from sponsorships and appearances. When a lockout halted new endorsements, her DRIP account kept working—reinvesting dividends and building wealth in the background. By the time she graduated, Kayla had a growing portfolio and steady income stream, helping her confidently navigate the transition to life after college sports.

Five Tactics to Build Your First DRIP Account

  1. Choose Dividend Aristocrats: Stick with companies with a long record of raising dividends (e.g., JNJ, PG) or ETFs like NOBL for reliable 2–3% yields. Skip risky, high-yield stocks that aren’t financially strong.
  2. Select a Low-Cost Platform: Use a major brokerage (Fidelity, Schwab) with fee-free DRIP options, or enroll directly through a company’s transfer agent if available.
  3. Start With a Target Allocation: Consider putting 20–30% of your NIL earnings into a DRIP. Even $50K–$100K invested can provide thousands in annual dividend income to reinvest and grow.
  4. Automate Your Contributions: Set up recurring transfers so you’re consistently investing, regardless of changes in your endorsement income.
  5. Plan for Taxes: Dividends are taxable. Set aside part of your income for taxes, and check with a CPA for advice based on your specific situation.

Actionable Tips to Make DRIPs Work

  • Track Earnings & Contributions: Monitor your NIL income and direct surplus into your DRIP regularly.
  • Screen for Quality: Use research tools (like Morningstar’s Dividend Aristocrats) to focus on financially healthy companies with strong, stable payouts.
  • Get Pro Guidance: Work with a fee-only financial advisor who understands athlete needs and can help you avoid scams or poor investments.
  • Stress-Test for Setbacks: Make sure your dividend income is enough to cover essentials during low-earning periods or lockouts.
  • Think Long-Term: Resist the urge to cash out early. Let your DRIP run for years to maximize compounding and growth.

Challenges and Considerations

DRIPs require patience and discipline. NIL income can be unpredictable, so automate contributions when possible and adjust as needed. Remember to plan for taxes, avoid over-concentration in any single stock, and stay focused on long-term growth rather than chasing short-term gains or “hot” stocks. Sudden lockouts or career changes can interrupt your plans, but a steady DRIP strategy helps you keep building wealth through all phases of life.

Conclusion

For athletes and anyone with variable income, dividend reinvestment is a smart, low-maintenance way to build lasting wealth. Start early, reinvest consistently, and stay disciplined—your future self will thank you.

Sources
  1. Vanguard. (2024). The Power of Dividend Reinvestment. https://www.vanguard.com/insights/dividend-reinvestment
  2. Forbes. (2024). NIL Earnings Volatility: Athlete Financial Challenges. https://www.forbes.com/sites/nil/2024/02/10/nil-earnings-volatility/
  3. Morningstar. (2024). Dividend Aristocrats in 2023 Bear Market. https://www.morningstar.com
  4. IRS. (2025). Publication 550: Investment Income and Expenses. https://www.irs.gov/publications/p550

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