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"The person who makes a success of living is the one who sees his goal steadily and aims for it unswervingly."
      -- Cecil B. DeMille

DRIP Investing

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.

Advantages:

  1. The investors do not need a large amount of money to start investing.

  1. The stock dividends are put to good use - typically, DRPs allow dividends to be reinvested at no fee

  1. Additional shares can be purchased for a small fee, or sometimes, no fee.

  1. About 100 companies have DRPs that allow investors to purchase shares at a discount from the current price.

  1. 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:
  1. Company run - administered from corporate headquarters normally as part of the overall shareholder relations effort

  1. 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

  1. 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
  1. 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)

  1. Partial shares can be purchased

  1. Money is held in a money market account accruing interest until shares are purchased

  1. All the information you need is online

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