On the Internet: Info on DRP Plans
by CI Staff
Shareholders find dividend reinvestment plans (DRPs) an attractive way to dollar cost average their share purchases, thats 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.
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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.
Netstock Direct is a Web site specializing in information about DRPs and direct investing. ShareBuilder Corporation was founded in 1996 as a private Internet company in Bellevue, Washington. Netstock Directs database of over 1,400 companies can be searched by plan type offered, industry, location, and special features (such as IRA or direct deduction from a checking account).
Once a company has been selected, you can view a DRP plan prospectus or choose to have materials mailed to you. In some cases, an invest now button allows the user to enroll in the plan on-line.
A resource page contains a wide variety of offerings: commentary by industry professionals Ted Allrich and George Fisher, Q&A sections, a list of books on direct investing, and a comprehensive list of investment terms. Links to DRIP Central, NAIC, Multex Investor, and Zacks are also provided.
Netstock Direct registration is free.
The Moneypaper newsletter and Web site promote the strategies of investing in large proven companies, investing for the long term, and cutting costs through DRP investing. Areas of interest include a section for enrolling in a companys DRP plan, a review of DRPs that offer periodic additional investments without fees, and a company spotlight feature.
Vita Nelson, editor of the Moneypaper, is also a portfolio manager for the MP63 index fund (DRIPX). This fund contains 63 companies that provide DRP investment plans. The fund was launched in 1994 with the focus on established companies with direct investing programs.
A one-year subscription to the monthly Moneypaper newsletter is $99. Other services offered by the Moneypaper include Direct Investing, a bimonthly newsletter that recommends DRP stocks ($199/yr.) and The Moneypapers Guide to Direct Investment Plans, a how-to booklet ($27). GuidetoDRIPs.com is an on-line version of the Guide. It allows you search the DRP database for companies that meet your criteria. It also allows you to establish a portfolio and track your investments ($99/yr.).
An affiliated service, Temper of the Times Investor Services, Inc., is an on-line site for enrollment in direct investing companies at www.directinvesting.com. This service costs $199 per year.
DRIP Central.com strives to be a town square for DRP investing. The site was started by the on-line investing guru Douglas Gerlach in 1996. This seemingly basic Web site offers a wealth of information for the DRP investor.
The site includes a questions and answer section where investors write in to Gerlach and he answers their DRP questions. Topics include the usual start-up questions, how to find DRP companies, and questions about IRA and DRP investing.
An eight-page on-line book written by Gerlach explains the DRP approach. Subjects discussed include getting started in the market using DRPs, how DRPs work, tax advice, and the drawbacks to using DRPs.
The DRP Web Site Directory is a good place to find resources regarding dividend reinvestment plans and information on getting started. Here, links are provided to the largest transfer agents that handle DRP plans for companies. A listing of books on DRP investing is available with a short summary of each book. Theres also a list of various organizations that specialize in helping individuals to become DRP investors, with links to companies such as FolioFN.com and ShareBuilder.com. Lastly, a link to NetstockDirect.coms searchable directory of DRPs and direct stock plans is provided in this area, with a summary of each plan.
Use of the site is free.
DRIP Advisors site spotlights information on companies that offer DRP plans. The site provides a list of DRP companies in alphabetical order. Details on each plan are given along with company profile, analysts ratings, earnings estimates, and news provided by HotQuotes.com.
An education center explains the basics of DRP investing and getting started. A glossary and bookstore are helpful in researching DRP investing.
The homepage of DRIP Advisor.com showcases a DRP of the week. Here, visitors find a quick review of a DRP, including commentary on the stocks financials and its dividend history. Details on the DRPs minimums and fees and its transfer agent are also shown.
Use of the site is free. A free E-mail newsletter on DRPs is also offered.
This site is based on the advice of Charles B. Carlson, CFA. DRIP Investor publishes a monthly newsletter that promotes a long-term buy-and-hold stock investing strategy. The Web site posts an on-line version of the newsletter as soon as the print version is available. Recent issues are available, as well as an archive section of past commentaries by Carlson. A message board, financial calculators, and lists of DRPs are provided on the Web site.
A six-month subscription is $42; a one-year subscription is $69.
The Motley Fool
The Motley Fool Web site contains a DRP Investing section on their Fools School page. It provides a clear description of how DRPs work and three kinds of DRP plans—broker-run, company-run, and transfer agent-run. The benefits of enrolling in a DRP program are outlined, as are the definitions of terms such as direct purchase plans and optional cash purchase plans.
The site takes readers through the steps of getting started in DRP investing, including the several ways to obtain your first share in a company. Two discussion boards on DRPs are also maintained—one on DRP basics and one on DRP companies.