Dividend reinvestment plans
(DRPs) are something a company offers as a way for their shareholders to buy stock directly from the company in very small to large amounts, and usually on a monthly basis if desired. They also reinvest dividends paid, using the dividends to purchase more stock.
The investors do not need a large amount of money to start investing.
The stock dividends are put to good use - typically, DRPs allow dividends to be reinvested at no fee
Additional shares can be purchased for a small fee, or sometimes, no fee.
About 100 companies have DRPs that allow investors to purchase shares at a discount from the current price.
They get investors to buy stock on a regular basis and hold onto the stock building a long term horizon for the investor.
Types of DRPs:
Company run - administered from corporate headquarters normally as part of the overall shareholder relations effort
Transfer agent-run - companies have third parties running the DRPs. Because they can use the same resources for a number of customers, can often provide DRP management services at a lower cost than the company could achieve by itself
Brokerage-run - dividends can be reinvested at no cost, but does not apply to optional cash purchases as most company-sponsored DRP plans do - optional cash purchases is one of the outstanding factors for making DRPs so attractive.
Another Option: BuyAndHold.com
This online discount brokerage allows you to invest in companies that offer DRPs for a very small initial investment ($20) and very low transaction fees ($2.99 per transaction)
Partial shares can be purchased
Money is held in a money market account accruing interest until shares are purchased
All the information you need is online