Buy Stocks Directly at ComputerShare: The Complete Process
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.
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 ($4.95 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.
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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
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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