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Computerized Investing > September/October 2003

On the Internet: Info on DRP Plans

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by CI Staff

Shareholders find dividend reinvestment plans (DRPs) an attractive way to dollar cost average their share purchases, that’s why more than 750 companies offer these plans. DRP plans convert the cash dividend of participating stockholders into shares of stock, which it holds for its investors. This form of payout helps the company by retaining an investor base with a long-term mindset, while the investor is supplied with additional shares for low or no fee.

Often, only one share is required to enroll in a DRP. Roughly 300 companies will sell initial shares directly to investors, bypassing the broker completely. Most plans also allow DRP participants to send in cash to purchase additional shares, in amounts from as little as $10 to as much as $300,000 dollars per year (a typical minimum is around $250). Some companies purchase shares for investors at a discount, usually from 1% to 10%. Also, there are approximately 200 companies that allow DRP investors to set up periodic investment transfers from their bank account into their DRP account.

The following Web sites can give you more information on the details of how DRP plans work, as well as listings of companies that offer DRPs, with their specific plan minimums and fees.

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