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.

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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.

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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:

  1. Registration Details
  2. Purchase Options
  3. Bank Details
  4. Dividend Reinvestment Options
  5. Validation
  6. 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:

  1. The cost of buying a share;
  2. The investment time frame;
  3. 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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16 Responses to “Buy Stocks Directly at ComputerShare: The Complete Process”

  1. Jesse |  Apr 09, 2008 at 1:01 pm

    Sun in all honesty: Zecco or Computershare in your opinion?

  2. STLPlace |  Apr 09, 2008 at 3:28 pm

    Nice explaination, Sun.

    But I don’t like PFE the stock. I sold mine at my sharebuilder account earlier this year. With the dividend reinvesting, my original 12.xx shares at 27.xx a piece becomes 14.xx shares, I took a small loss.

    PFE has nice dividend now, but its pipeline is very weak.

  3. Sun |  Apr 09, 2008 at 9:13 pm

    Jesse: I don’t really think you can compare Zecco and Computershare, because the latter is not a broker. It’s more like an aggregator of direct investment plans offered by individual company that charges different fees.

    For Zecco, I don’t have a positive experience with them and the only thing I do like is the commission free trading. Their website is difficult to use and their customer service is bad. I think Zecco is only worth for small investors who buy stocks in a small amount often. If you buy stocks in a large amount once in a while and are the buy-and-hold kind of investor who don’t trade a lot, then paying $0, $4, or $7 commission doesn’t really matter. There are many better brokers out there that provider investors friendly interface and good customer service. That’s why I only have a very small “play” account with Zecco so I can do 10 transactions every month :)

    For Computershare, it really depends on the plans. If you can find a plan that charges a little or no fee for making regular purchase (for example, Bank of America charges 2 cents per share for additional purchase), then Computershare could be very useful in building a dividend-paying portfolio slowly. What I like Computershare best is that it allows me to buy stocks on a dollar amount not the number of shares (dollar cost averaging). You are not going to find that with any other brokers (except Sharebuilder, but Sharebuilder is much more expensive).

  4. Chengdi |  Apr 10, 2008 at 12:22 am

    Sun, there is no fee for additional purchase for the Bank of America DRIP with Computershare. (There are a $10 initial setup fee and sale fee and that’s all)

    I have been doing the Bank of America DRIP since last December thanks for the information from you blog.

  5. Sun |  Apr 10, 2008 at 12:46 am

    Chengdi: Thanks for the correction. I must have thought something else though I also buy BAC shares. And I am glad you found something useful from this blog :)

  6. Frankie |  Apr 10, 2008 at 1:14 am

    Sun, thanks for the previous posts on the same topic. They helped me go through the purchase of PGN DRIP. It was good that you went through the process using computerShare in this post. I had trouble setting up my account online using computerShare(formerlyEquiserve), but I discovered that you have to set it up via the computerShare website.

  7. newt |  Apr 15, 2008 at 2:20 pm

    sun, thanks for the walk-through… i too have bought several stocks through computershare [and the old equiserve] over the years. nice thing is you no longer need to login to each holding separately, computershare now has a single login so i can see and manage all my drip investments.

  8. Sun |  Apr 15, 2008 at 11:03 pm

    Frankie: I also bought my first DRIP share from Equiserve before the merger with Computershares was completed. It happened sometime last years that I had to create a new account with Computershare. And yes, it’s good to have one login to view all the investments. Also, when I bought my first DRIP share, somebody mentioned I have to track all the dividend distributions myself, which could be a headache at tax time. That I guess isn’t true because Computershare does provides 1099-DIV forms.

  9. drip investing |  Apr 22, 2008 at 12:33 am

    I think the biggest advantage of Computershare DRIPs and Sharebuilder is the dollar cost averaging (investing by $, not by whole share amounts). If that is not an issue because you plan on buying whole lots, then discount brokers are the way to go. Getting separate account statements and keeping track of everything with DRIPs is not worth the hassle.

  10. Saul Brightman |  May 23, 2008 at 10:17 am

    How to I open a separate account and buy J & J stock directly?

  11. Sun |  Jun 03, 2008 at 10:07 pm

    Saul: To buy J&J from ComputerShare, you will have to buy one share from a discount broker first, then tell the broker to transfer that share to ComputerShare. Once you are a investor, you can participate the direct investment plan with ComputerShare.

  12. MoneyEnergy |  Aug 23, 2008 at 10:22 pm

    Nice post, well explained. I love DRIPs. I’ve also written quite a bit about them on my site. I’m a Computershare user, have been for just about ten years now. I own about 15-16 DRIPs this way. It’s really the best option for the average person, in my opinion.

  13. BD |  Apr 13, 2009 at 2:53 pm

    The following do not have any purchase fees and have a very low monthly automatic investment requirement at computershare …

    BDX ($50/mo – no purchase fees)
    XOM ($50/mo – no purchase fees)
    LMT ($50/mo – no purchase fees)
    OKE ($25/mo – no purchase fees)

    These are no brainers.

  14. Mark |  Jan 24, 2010 at 12:57 am

    It was good that you went through the process using computerShare in this post.

  15. Niki Arinze |  Feb 01, 2010 at 4:33 am

    Sun,
    Can you really get high quality stock with these DRIP plans? Bank of America and Pfizer was another one I saw was mentioned are not good companies? Are DRIP plans for people who do not actively manage their accounts?

    • Sun |  Feb 02, 2010 at 8:40 am

      Niki: I think you still can buy high quality stocks with DRIP/DSPP plans. BofA was, I think, a good company when I bought the stock before it was hit by the financial crisis and all the problems surfaced afterward. Pfizer has the problem of its pipeline. That said, there are still good companies with dividend growth year after year that you can buy through DRIP/DSPP plans like those offered through ComputerShare. Since most of these stocks are not high-growth, high-volatility stocks, I do feel that I don’t have to actively manage the accounts.