The Sun's Financial Diary » DRIP

Why Direct Stock Purchase Plan Still Makes Sense

Sun — Thu, 28 Jan 2010 14:35:51 +0000

I bought a lot of individual stocks in 2009 in my brokerage accounts, mostly with Scottrade. Many of them were purchased before the market hit the bottom (now we can safely call it the bottom) in March. But those stocks were not all what I bought last year. In addition to stocks purchased here and there, I also added two stocks, ExxonMobile (NYSE:XOM) and Boston Properties (NYSE:BXP), to my regular purchase list, all through Direct Stock Purchase Plan (DSPP) at ComputerShare. With the two additions, the list of DSPP stocks I buy regularly grew to 5, which also include Bank of America (NYSE:BAC), Procter & Gamble (NYSE:PG), and Progress Energy (NYSE:PGN). I will probably add more to the list gradually.

With so many discount stock brokers where I can buy unlimited number of stocks at only a few bucks of commission (such as OptionsHouse $2.95/trade and SogoTrade $3.00/share) at any time, you may ask why I still bother to use programs like ComputerShare to buy stocks. Well, the reason is quite simple: Because I think DSPP still makes sense, even when there are so many cheap alternatives including the two I just mentioned.

Investing with DSPP Is still Cheap

Actually, this is THE reason why I am still using DSPP, even though DSPPs usually involve more fees and most plans, if not all, impose a minimum investment for both initial and ongoing purchases. Unfortunately, most of them can be avoided by carefully choosing which plan to use. For example, a typical DSPP plan offered through ComputerShare charges such fees as Initial Setup Fee, Cash Purchase Fee, Ongoing Automatic Investment Fee, Purchase Processing Fee (per share), Dividend Reinvestment Fee, Batch Sale Fee, Batch Sale Processing Fee (per share), Market Order Sale Fee, and Market Order Processing Fee (per share). That’s a lot of fees comparing to buying stocks from most brokers which charge a flat fee for a buy or sell order, regardless the number of shares. However, not every plan charges so much fees. Otherwise, it wouldn’t make any sense to use DSPPs. For instance, when I joined ExxonMobile’s DSPP last year, I didn’t pay any fee. The only fee that I will pay later is the Batch Sale Fee of $25 and Batch Sale Processing Fee at $0.12/share. All other fees are waived and the company pays for dividend reinvestment. Since I am only buying $100 a month, I probably won’t own a lot of shares at the time when I decide to sell in the future. Thus, using XOM’s DSPP to buy the stock is an affordable option for me.

On the other hand, there are also plans like the Coca-Cola plan which charges $10 Initial Setup Fee, $3 Cash Purchase Fee, $2 Ongoing Automatic Investment Fee, $0.03/share Purchase Processing Fee, and 5% of amount reinvested up to a maximum of $2.00 for dividend reinvestment. I will definitely stay away from plans loaded with fees.

Get Free Dividend Reinvestment

More and more discount brokers are offering free dividend reinvestment these days. Among brokers I am using, I know TradeKing and Zecco have such services, but not Scottrade. At Scottrade, dividends are paid as cash and if I want to use the distribution to buy more stocks, I will have to pay $7 commission for every purchase. Given the difference in return between with and without dividend reinvestment, it will be a big loss in the long term if dividends are taken as cash because the broker I use simply doesn’t offer free dividend reinvestment service. And having the dividend reinvested is the reason I buy those dividend paying stocks in the first place. With DSPP or DRIP (Dividend Reinvestment Plan), I can get dividends reinvested automatically for free if I choose to buy stocks from plans with free dividend reinvestment (not the Coca-Cola stock though). Even though stocks offered through places like ComputerShare are limited in quantity, but not so in quality. In fact, there are many high quality companies with rich dividend payouts. Investing in these companies with DSPP is a valid choice.

Automatically Invest in Good Market and Bad

When you buy stocks from a broker, you will pay a fixed commission for every order and you can only buy a round number of shares. For example, if you want to buy one share of Google stock (NASDAQ:GOOG), you need at least $540 to buy the minimum of one share at the current price. If you only have $100 to invest, then sorry, you will have to look for something else that’s cheaper in price because no broker will sell you one fifth of a share of GOOG. This is not the case with DSPPs that I am using with ComputerShare. I basically set up an automatic investment plan for the stock I want to buy and each month a fixed amount money will be withdrawn from my bank account on a given day of the month to purchase the stock that usually gives me fractional shares. This whole scheme is a lot like what ShareBuilder is doing with its automatic investment plan, but in a much cheaper way. With ShareBuilder, it will cost you $4 for each investment. When you choose a DSPP with no ongoing automatic investment fee like the XOM plan I mentioned above, there’s no fee involved in the transaction.

Actually, if you are familiar with dollar-cost averaging often used in mutual fund investing, the free DSPP automatic investment plan works in the same way, thus you get the same benefit: Buy the stock in good market and bad, no market timing of any sort. This is especially good for investors who can only set aside a small amount of money, say $100, to invest each month. Unlike mutual funds which usually require a minimal initial investment of $1,000 or more (most Vanguard funds require at least $3,000), DSPPs’ initial investments are much smaller, usually below $1,000, making it easier to buy stocks with a small budget than invest in a mutual funds (I am not talking about the risk of investing in individual stocks and mutual funds here).

Of course, DSPPs have their limitations. In you buy through ComputerShare, you have a limited number of choices because not every public company has a DSPP. Also, many plans do involve high fees that make them less appealing for regular purchases (like every month), plus the lack of flexibility to choose on what day you want to buy and the frequency you want to buy (with ComputerShare, you can only make monthly investment). But I feel these drawbacks don’t overshadow the benefits of using DSPPs.

Does investing with DSPP still make sense? It does for me. If you want to know more about buying stocks from ComputerShare, check out my ComputerShare review post to learn more about the process.

Photo credit: jm3

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Why Direct Stock Purchase Plan Still Makes Sense

Adding Exxon Mobil to My DSPP List

Sun — Wed, 06 May 2009 15:38:54 +0000

I am still expanding my stock investments, this time through the DSPP program at ComputerShare.

Yesterday, I added Exxon Mobil (XOM) to my regular purchase list with a monthly purchase of $100 of the stock. The reason that I want to buy it through a DSPP program rather making a one-time purchase like I did with my other stock trades through a broker is that I am buying the stock mainly for its dividend payout, which is currently at $1.68/share. XOM is also one of S&P 500 dividend aristocrats, those stocks that have increased their dividends for at least 25 years in a row. The stock has come down quite a bit from its 52-week high, but I still don’t have the fund to purchase the amount I want, so I decide to go with the gradual approach

Anyway, the XOM DSPP program has a minimum one-time purchase of $250, but the amount reduces to $50 when using automatic purchase plan, which I use. Other fees of the program include:

Initial Setup Fee: $0.00
Cash Purchase Fee: $0.00
Ongoing Automatic Investment Fee: $0.00
Purchase Processing Fee (per share): $0.00
Dividend Reinvestment Fee: Company Paid
Batch Sale Fee: $15.00
Batch Sale Processing Fee (per share): $0.12
Batch Maximum Sales Fee: N/A
Market Order Sale Fee: $25.00
Market Order Processing Fee (per share): $0.12
Market Order Maximum Sales Fee: N/A

As I mentioned in my ComputerShare review post, many plans, such as AT&T DSPP plan, offered through ComputerShare charge fees to setup the account, purchase additional shares, and reinvest dividend. I am not interested in paying any those additional fees to buy DRIP stocks because that will make the cost of buying stocks with a DRIP plan higher than using a discount broker with free dividend reinvestment, like TradeKing.

Actually, in addition to XOM, I am also interested in another DSPP stock, Boston Properties (BXP), which I had on my radar for quite a long time. The dividend payout $2.72/share is even sweeter. Unfortunately, it looks like the company is going to cut the dividend to $.50 soon. So, I am going to wait on this.

*Stock chart from INO

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Adding Exxon Mobil to My DSPP List

Buy Stocks Directly at ComputerShare: The Complete Process

Sun — Wed, 09 Apr 2008 02:49:11 +0000

I bought my first share of Bank of America (BAC) through ComputerShare back in November 2006. Since then I have been making regular monthly purchase and consider it as a good alternative to buying stocks through a broker with a fixed commission.

If you’re also considering investing with ComputerShare, but haven’t started the process yet, then this post will give you a rough idea of what it takes to buy dividend paying stocks from ComputerShare. In this post, I will use Pfizer as an example to show the complete process of buying stocks directly at ComputerShare.

Investment plans

ComputerShare offers two kinds of investment plan: Direct stock purchase plan (DSPP) and Dividend Reinvestment plan (DRIP). Of them, DSPP is available to all investors, whether they own the stocks or not, and DRIP is for existing shareholders. If you haven’t purchased any stock from ComputerShare before, then you will need to use the DSPP link on the Investment Plans page to find the company you want to invest in to become a shareholder first.

Costs of DSPP plans

Since I don’t own Pfizer (PFE), which is available as a DSPP stock, I have to go to the DSPP list and find PFE. In this list, you can also find information such as the minimum initial investment for each stock. The minimum initial investments rage from $50 to $2,500, which are lower than most mutual fund minimums. One of my criteria when selecting a DSPP stock is low initial investment because I plan to buy the stock on a monthly basis, there’s no reason to make a big initial purchase. So I usually don’t look at stocks require more than $1,000 to begin with. For PFE, the $500 initial investment is within my range.

In addition to minimum initial investment, there are other factors to consider before making a decision on whether it’s worth it to buy stocks from ComputerShare instead of from a discount broker. Of those factors, what I concern the most is always the costs, which include (click on View of a particular plan to see details of plan fees):

Initial Setup Fee
Cash Purchase Fee
Ongoing Automatic Investment Fee
Per Share Purchase Processing Fee
Dividend Reinvestment Fee
Sale Fee
Per Share Sale Processing Fee
Maximum Sales Fee

As you can see, buying stocks form ComputerShare could involve more fees than from a broker, potentially making the investment too expensive. Therefore, when choosing a plan, I will try to stay away from those that charge a per-share based purchase fee and per-transaction based processing fee, though I can afford to pay a small one-time account setup fee. An example of how investing with ComputerShare can incur excessive fees is the Altria’s (MO) investment plan which charges:

Initial Setup Fee: $10.00
Cash Purchase Fee: $5.00
Ongoing Automatic Investment Fee: $2.50
Per Share Purchase Processing Fee: $0.03

In this case, it’s better to go directly with a discount broker such as TradeKing ($4.95 commission) or Zecco ($0 commission), or even Scottrade ($7 commission). Fortunately, for Pfizer, the plan only charges a $15 Sale Fee and $0.12/share Sale Processing Fee. On the other hand, sale fees, which are very common with direct investment programs, could become a big expense later when the shares are to be sold because the cost is proportional to the number of shares owned.

Make a purchase

After reviewing all the costs of investing in a particular plan, the next step is to setup an account and make a purchase (click the Buy Now link), which involve six steps:

Registration Details
Purchase Options
Bank Details
Dividend Reinvestment Options
Validation
Confirmation

For the Purchase Options part, there are two options: One-time purchase or Recurring purchase. Since this is the first time that I will buy Pfizer shares, I will need to use the one-time purchase option to make an initial investment. For recurring purchase, ComputerShare currently only offers monthly automatic investment.

With ComputerShare, purchase can be made via direct debit from a bank account. To establish direct debit, bank information such as routing number and account number need to be provided. And in Step 4, I chose Full Dividend Reinvestment over partial cash payout. Finally, after validating and confirming that the information I provided is correct, my new DSPP plan is ready.

Invest in DRIP plans

The above process for buying stocks offered by ComputerShare in DSPP plans. There are also many other stocks (from companies such as Johnson and Johnson (JNJ) and Hewlett-Packard (HPQ), etc.) available through DRIP programs which require investors to be become a shareholder first before using the dividend reinvest plans. In order to buy these stocks through ComputerShare, you will have to buy one share of the stock you want to invest from a broker then transfer it to ComputerShare, either electronically or by mailing them the stock certificate. I haven’t done a transfer like this before, but this is what I wasn’t told when I called ComputerShare last week, asking the procedure of investing in DRIP plans.

Once the transfer is completed, you will be able to see the one share you own from your ComputerShare account and start to make regular purchase using what I have discussed above.

Is it worth it?

With so many discount brokers out there which charge a small commission for buying a stock regardless the number of shares purchased, direct investment plans from ComputerShare are not that appealing, especially when discount brokers only offer free dividend reinvestments (TradeKing and Zecco do, but Scottrade doesn’t). So when does investing with ComputerShare make sense, given that there are more fees involved than buying the stock from a broker?

In my opinion, if you want to buy a stock in one lump sum, then there’s no reason to use ComputerShare because many plans charge account setup fee, purchase processing fee, and sale fee which could be more than what a discount broker charge for buying and selling a stock. That said, it doesn’t mean ComputerShare will make a better choice if you want to invest in a small amount regularly (dollar cost averaging). In this case, a broker isn’t an option for DCA if it charges commission for each transaction. Since most DRIP/DSPP plans charge per-share based processing fee every time shares are purchased, you will need to consider:

The cost of buying a share;
The investment time frame;
The number of shares to be purchased every time.

so that it won’t cost you too much to buy a share every time and you won’t have to pay a big sale fee later either. Of course, always pick the stock that costs less to own and pays a fat dividend

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Adding P&G to My Regular Investment List and Getting Shares of Philip Morris International

Sun — Fri, 04 Apr 2008 02:16:40 +0000

In December 2006, I bought my first share of Procter & Gamble (PG) through their Shareholder Investment Program (SIP), which is a direct investment program, as part of my effort to build a portfolio that generates passive income (other stocks I own in this category include Bank of America, Progress Energy, Altria, etc.). However, in the past sixteen months, I managed to make only one additional purchase of $200, not really a good effort One of the reason was there’s a $1/share investment fee charge for every additional purchase. So it doesn’t make too much sense buy a small amount frequently.

After P&G updated their SIP last summer, the additional charge was eliminated. At that time, I thought I can finally invest every month, but that was just a thought and I never started until early this week when I finally decided to give my dividend-paying investments a boost. I setup an automatic purchase plan to buy $50 PG every month starting this month. That’s not a big investment because $50 even isn’t enough to buy one share at the current price (PG is traded at $70.47 as of today), but it’s better than buying $200 every year. In addition, I also buy $50 of Bank of America (BAC) and Progress Energy (PGN) every month through ComputerShare’s DRIP program.

Speaking of Altria (MO), I received 72 shares of Philip Morris International (PM) early this week from my investment in MO. I have 72 shares of MO in my account at TradeKing. After Altria completed the spin-off of Philip Morris International last week, every MO share received one PM share. I plan to hold on to my PM shares for now to see if the growth expectation can materialize.

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Adding P&G to My Regular Investment List and Getting Shares of Philip Morris International

Procter & Gamble DRIP Program Updates

Sun — Mon, 25 Jun 2007 22:15:03 +0000

Last December I bought some P&G shares through their direct stock purchase program as part of my income-generating portfolio. After comparing what the company charges for direct investment against commissions at ShareBuilder, I decided to go with the company instead of using ShareBuilder. Though the cost of each trade is quite low when buying a small amount, there are still some fees that I consider excessive. For example, there’s a $1 per share charge for additional investments on top of the $0.02 per share commission. This essentially prevents investors from making large investments as the fee could be tremendous.

Last Friday, I received an email from P&G about changes in their Shareholder Investment Program (SIP), which include:

Enrollment Fee – None (used to be $7.50);
Dividend Reinvestment Fee – None;
Optional Cash Investment Fee (via Direct Debit) – None (used to be $1 per share plus $0.02 per share commission);
Maximum Optional Cash Investment – $6,000,000 (one time and annual);
Minimum Initial Investment – $250;
Minimum Optional Cash Investment – $50;
Sales Fee – $15.00 ($7.50 if requested online), plus $0.12 per share (used to be $10 stock sales fee plus $0.02 per share commission).

For DRIP investors, the removal of enrollment fee and investment fee is definitely a good news.

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Procter & Gamble DRIP Program Updates

Is DRIP still Worth the Effort?

Sun — Thu, 19 Apr 2007 15:13:53 +0000

First of all, what is DRIP? According to Wikipedia, a DRIP (dividend reinvestment program or dividend reinvestment plan) is

an equity investment option offered directly from the underlying company. The investor does not receive quarterly dividends directly as cash. Instead the investor’s dividends are directly reinvested in the underlying equity. This allows the investment return from dividends to be immediately invested for the purpose of price appreciation (and compounding), without incurring brokerage fees or waiting to accumulate enough cash for a full share of stock. Some DRIPs are free of charge for participants, while others do charge fees and/or proportional commissions.

I didn’t start to use DRIP since late last year and have bought three stocks through DRIP programs so far: Bank of America (BAC) and Progress Energy (PGN) from ComputerShares and Procter & Gamble (PG) from the company. There are two reasons that I want to buy DRIP stocks: commission and dividend.

With online discount brokers getting popular and many offering free dividend reinvestment, DRIPs seem to become less appealing nowadays. However, for most brokerage firms, investors will have to pay a certain amount of commissions when trading stocks (Zecco is an exception, but I am not confident enough to use them yet). With some company sponsored DRIP programs, you can buy shares with zero commission (you may have to pay an one-time account setup fees and per share based commission when selling your holdings). And this is main reason for me to use DRIPs to purchase the three stocks: I can buy them with no (BAC and PGN) or less (PG) commissions that I would otherwise pay for other brokerage firms.

Another reason for buying these individual stocks is they all have nice dividend payout. Usually, companies offering DRIP are considered as well-established companies (value companies) that have steady but moderate growth over years (you won’t find many high-fly tech companies use DRIP to attract investors). For the three stocks I own:

BAC: Dividend yield: 4.40%, annual payout: $2.12 (2006), quarterly dividend growth: $0.10/share in 1993, $0.56/share in 2007 (BAC dividend history).
PGN: Dividend yield: 4.80%, annual payout: $2.42 (2006), quarterly dividend growth: $0.425/share in 1993, $0.61/share in 2007 (Progress Energy has increased the dividend 19 straight years).
PG: Dividend yield: 1.90%, annual payout: $1.24 (2006), quarterly dividend growth: $0.03/share in 1981, $0.31/share in 2007 (PG has increased its annual dividend for 47 consecutive years).

With DRIPs, I buy a small amount ($50 or $100, depending on the minimum requirement) of the stocks every month so I don’t have to worry about price fluctuations and I am making a long-term commitment to the company. Of course, it always feels that investing in individual stock is riskier than, for example, buying a basket of them in the form of a mutual fund. But do you trust more a mutual fund’s manager than a company’s board? Unless you are strictly investing in index funds, you are not a lot safer with an actively managed fund.

Now what’s the downside of DRIP? The biggest problem may be that you have to track the cost basis of your investment yourself for tax filing. But with an Excel spreadsheet, this is not a very bid deal as long as you remember to record the distributions every time. Another one is, instead of a flat fee when selling stocks, DRIP usually charges a fix fee plus per share based commission. This means you will pay more when you sell your shares than what you will pay for a discount broker.

For more information on DRIP, check out DRIPInvesting.org and ComputerShares.

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Is DRIP still Worth the Effort?

Where to Buy DRIP Stocks

Sun — Sun, 18 Mar 2007 19:16:28 +0000

I am a fan of dividend reinvestment plan (DRIP), though I didn’t start participating till late last year. Currently, I have several stocks purchased through DRIP programs: Bank of America (BAC), Progress Energy (PGN), and Procter & Gamble (PG). The first two are from ComputerShare while the last one is from the company directly.

The main benefit of buying stocks directly from the issuer either through a Direct Stock Purchase (DSP) plan or a DRIP program is that you don’t always have to pay a commission when making a purchase as you do with most brokerages, though some DRIP programs also charge a fee for direct purchases and in some cases the fees are no cheaper than what you will pay through a broker that also offers dividend reinvestment. Therefore, when I decide which DRIP program to participate in, I only choose those with either no purchase fee or the fee is much lower than that’s charged by my brokerage firm such as Sharebuilder. Two of my DRIP stocks, BAC and PGN, don’t charge purchase fees.

If you are interested in DRIP stocks, the following are some places that offer DRIP/DSP programs or related information:

ComputerShare: Domestic stocks only and you can find many blue-chip stocks
The Bank of New York Investor and Client Service: Offer both domestic stocks and ADRs
StockSelector.com
DirectInvesting.com

Also check out the related posts below for more discussions on DRIP programs.

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Where to Buy DRIP Stocks

P&G Shares Purchased

Sun — Sun, 17 Dec 2006 20:57:06 +0000

Early last month, I sent the account application form together with a $500 check to P&G to invest in their stocks. The confirmation mail arrived yesterday, saying the initial purchase was made on December 1st. This part of my recent DRIP investments in dividend-paying stocks. So far I have bought three stocks: Bank of America (BAC), Progress Energy (PGN), and P&G (PG). The first two were purchased via DRIP programs at ComputerShare.com and PG was from the company directly. Here's a summary of P&G's Shareholder Investment Program (SIP):

$250 minimum initial investment;
$7.50 one-time account setup fee;
$50 minimum additional purchase with $1.00 per share fee via bank account and $2.50 via check or money order, plus $0.02 per share commission;
5% of quarterly dividend up to maximum of $1.25 plan maintenance fee;
Commission free dividend reinvestment if using electronic statement;
$10 stock sale fee plus $0.02 per share commission.

Overall, the plan's fee structure is not as simple as that of BAC or PGN (no buy/sale commission and no account maintenance fee), though the fees are not terribly high (it could become a problem when the number of shares reaches a certain level later on). In addition, I have to request an online access to manage my PG shares as P&G doesn't provide any online registration when the first purchase was made. Still paper based process and it's not very convenient at all.

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P&G Shares Purchased

Bank of America Shares Purchased via DRIP

Sun — Mon, 13 Nov 2006 15:44:34 +0000

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 (ComputerShare reviews) 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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Bank of America Shares Purchased via DRIP

Buy Stocks Directly from Companies? Absolutely!

Sun — Sat, 21 Oct 2006 17:16:53 +0000

I have always wanted to buy stocks from companies directly instead of going through a middle-man and paying anywhere from $4 to $7 per trade. However, I never knew where to go and how to start. So the plan has been put off and I really didn’t actively pursue the idea. Then last night, I found what I have been looking for at Savvy Saver, who has a post about DRIPS (dividend reinvestment programs) and how to buy stock direct from Computershare (formerly EquiServe). Though the stocks will be purchased through Computershare, not really directly from the companies, there’s no commission for most of the company stocks offered as companies pay for the fees.

Following the instructions on Savvy Saver, I went on to check the companies and plans available for DRIPS at Compushare. Though there aren’t many companies offering direct stock purchase and dividend reinvestment and some of them are relatively unknown to me, I was still able to find a couple of well established, dividend paying companies that I am interested in. For example, Bank of America, ExxonMobil, Verizon, Home Depot, and Pfizer. In addition, it looks like that there are some mutual fund offerings as well.

What I like this service, as summarized by Savvy Saver, is

that many stocks only charge a fee for selling, for example $15 regardless of the amount. Many have no fee for purchases, and automatic dividend reinvestment is almost always free. Some companies even offer small discounts. Most want a minimum initial investment ranging from $250-$1000, and monthly minimums (some offer quarterly) are typically in the $50-$250 range.

That means I don’t have to have a big account and can buy a fraction of a share without paying any extra fees. I haven’t really get into the details of all the plans yet, but it seems worth serious consideration.

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Buy Stocks Directly from Companies? Absolutely!