| Stock Investment |
There are many different ways to enroll in a
company's Drip plan. Usually, you need to own at least one share of the
company's stock in order to enroll. You can get that share through a
broker, or Drip service, or friend, and then easily enroll in the plan.
Finally, for companies that don't offer free Drips or Drips at all (such
as Microsoft, Cisco Systems, American Online, Amgen, and Starbucks),
consider new Drip-imitating investment services such as BuyandHold.com and
ShareBuilder.
In most cases, only investors who own at least one share of a company's
stock can participate in its dividend reinvestment plan (Drip or DRP). To
participate in Coca-Cola's (NYSE: KO) plan,
for example, you first need to own at least one share of its stock and you
need to own it in your name (not in the broker's name).
This means
you need to have the shares, in almost all cases, put into your name on
the certificate. As you purchase at least one Coke share, in our example,
and it's in your name, you should also call the company and ask for Drip
enrollment information. Coca-Cola would send you information that would,
in turn, direct you to the First Chicago Trust Company in New York and,
through First Chicago, you would complete the necessary steps to enroll in
Coca-Cola's Drip.
After enrolling, all of your account activity and
record-keeping takes place through First Chicago Trust. Most companies
operate Drips through a transfer agent such as First Chicago. Some run
their own Drip plans (not many, though). Some plans, usually called direct
stock plans (DSPs), don't require you to own a single share of stock to
enroll. You enroll by buying your first shares through the plan! Most
plans require you own at least one share first, though, for enrollment
purposes.
If you don't own one share of stock yet, using a Drip
enrollment service or inexpensive brokerage service (like those listed
below) is convenient and can be very reasonable. Using an enrollment
service, you needn't open a brokerage account.
If you do have a
brokerage account, using a discount broker to buy one share of the stock
for you and then getting the Drip enrollment forms for your company is
another route to go. It does take more legwork on your part, and you
should be sure to ask what it will cost to have the stock put in your name
and mailed to you. Costs vary substantially, and some brokers -- even
discount brokers -- charge too much for this service. You shouldn't pay
over $20 for a certificate and trading commission.
Information about Direct Investment Plans (both Dividend
Reinvestment Plans and Direct Stock Plans)
1. The Moneypaper website lists all the
more than 1,100 companies that offer Drips, information to get started,
and forms to begin enrollment through its service.
2. The Motley
Fool's Investing Without a Silver Spoon book offers a full 300-page
list of all direct investment plans (Drips and DSPs), as well as
educational information (from how to start, what to look for in an
investment, taxes, and accounting for a portfolio) in 100 pages of text.
The book, written by Drip Port cofounder Jeff Fischer, is
available in FoolMart for a song.
3. NetstockDirect, a
direct-investor website, offers a full list of companies with direct
investment plans, updated daily. Netstock allows you to enroll online in
several hundred companies offering direct stock plans. It also offers
mutual fund (index fund) direct enrollment services.
4. The Direct
Stock Purchase Plan Clearinghouse (800-774-4117) is a free service that
allows investors to order up to five prospectuses from companies that
offer DSPs. (This is for direct stock purchase companies only, not
DRP-only companies.)
Some Ways of Getting Started!
1.
NetstockDirect, as listed above, allows you to start directly online at
its site in several hundred plans, while offering contact information on
the other plans available from companies not offered directly on the site.
Through Netstock's discount brokerage-type service, ShareBuilder,
you can invest Drip-style for $4 per trade in 4,000 different companies
(even those without Drips). Note that the ShareBuilder service is not an
official Drip plan enrollment. It is a way to invest in Drip fashion
(fractional shares, dollar cost averaging, and reinvest dividends) even in
companies that don't offer Drips for a reasonable price.
2. The Moneypaper, at 1-800-388-9993,
charges first-time subscribers $90 for a year's subscription to the
Moneypaper monthly newsletter. Through Moneypaper's "Temper of the Times"
service, however, anyone can buy initial shares of more than 1,100
companies in order to be enrolled in their Drips. The stock purchase fee
is $20 for most companies for subscribers, and is $30 for non-subscribers.
For this price, Temper buys your first necessary shares of stock and
enrolls you in the company's Drip. From then on, you only need to deal
with the company that you enrolled with.
3. The National Association of
Investors Corp. is open to individual investors for a $39 annual
membership. First single shares are available for about 2000 companies.
Stock purchase fee: $7 per company. NAIC also offers other investment
options worth investigating, especially for investment clubs.
4.
First Share, at 1-800-683-0743, links members with investors willing to
sell a single share in a company. Members pay sellers the share's market
value plus $7.50. Membership is $18 a year, and First Share also charges
$10 for each transaction. (So it isn't the cheapest option.) About 4,000
members hold shares in 350 companies. The program is meant for investors
who want to enroll in at least three dividend reinvestment
plans.
5. BUYandHOLD is
similar to ShareBuilder. It is a way to invest in a few thousand different
companies in a Drip fashion. BUYandHOLD, with its long-term focus, allows
you to dollar cost average and buy fractional shares and reinvest
dividends for free. As with ShareBuilder, this is a good way to build
stakes in companies that don't offer Drips (many of the faster growing
companies) or that have expensive fees in their Drip plans. BUYandHOLD
charges $6.99 per month, and that includes two buys per month. Additional
buys are $2.99 each. It allows unlimited monthly transactions for $14.99 a
month. Or you can open the account as an IRA account and just pay $2.99
per trade.
6. At The Motley Fool's Discount Brokerage Center, you
can find brokers that offer low commissions on your first necessary share
purchases. Also check the certificate fee, which is listed for all brokers
in the Fool's Brokerage center. Don't pay over $20 to a discount broker
for the buy commission and certificate service when you only want to
enroll the shares in a Drip.
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