Bank of America Shares Purchased via DRIP

Posted by Sun on November 13, 2006
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Since I found out that I can directly purchase stocks from issuing companies (not all listed but still quite a large selection) last month, I didn’t waste too much time before getting into action. After going through DRIP stocks offered at Computershare and some research, I opened accounts with Computershare to buy shares of Bank of America (BAC) and Progress Energy (PGN) with initial investment of $1000 and $250, respectively, and dividend automatically reinvested. The reason I chose these two stocks is mainly for their dividend yield, though both of them are close to 52-week highs.

For BAC, its dividend yield is at 4.10% with a payout of $2.24 per share. Despite that BoA closed at $54.77 on November 10th (the time my shares was purchased), only 10 cents shy of its 52-week peak, the stock is not that expensive at forward P/E ratio of 11.09 compared to the industry average of 12.8, but the dividend yield is higher than the average of 3.5%. On the other hand, PGN has a forward P/E of 17.02 as compared to the industry average of 12.3, making the stock a little expensive. But PGN has a dividend yield of 5.4%, much higher than its peers of 3.1%.

This is the first time I bought stocks via DIRP programs. Though the opening process was quite simple (both stocks can be bought online), taking several minutes to complete, the time till the initial investment is made can be quite long. For example, I opened the BAC account on October 26th, the money was drafted from my bank account on October 31st, but the investment wasn’t made till last Friday (November 10th), though the projected investment date was November 7th. For PGN, the projected date is November 15th and I may have the same delay. For both BAC and PGN, the automatic investment fee and dividend reinvestment fee are paid by the companies, so there’s no additional costs for subsequent investment. However, BAC charges $10 account setup fee and another $10 sale fee. For PGN all the fees are paid by the company.

Since each stock is sold through a company sponsored plan at Computershare, I have an independent set of issue ID and account number for BAC and PGN and have to login to each account to manage my holdings. Not very convenient, but understandable. There are six simple steps to open an account at Computershare:

Account Information: Enter Name, address, and SSN
Tax Certification: Certify SSN
Investment Selections: Choose type and dollar amount of investment
Payment Information: Specify bank account for purchases
E-mail Preferences: Setup preferences for information delivery
Summary & Confirmation: Final review of information provided

One thing to be careful is that if you Google Computershare, you will find two different companies with the same name: one is Computershare, the other is formerly EquiServe. My accounts are with EquivServe. Computershere has different offers (more selections) and the opening process is a little different as well.

2million has some excellent posts on DRIP (what to buy and how to buy). If you are interested in investing in DRIP, make sure you read them before sending out your checks.

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