Investing with DRIPs and DPPs
Overview

What are DRIPs and DRPs?

DRIPs or DRPs are Dividend Reinvestment Plans through which companies allow their shareholders to reinvest dividends and purchase shares without a broker (direct stock purchase plans). The money you save on brokerage commissions is extra money for you to invest in your portfolio.

Buying Stocks without a Broker

For years many corporations have offered shareholders the opportunity to reinvest dividends and purchase shares without having to buy through a broker or pay brokerage commissions. Because of SEC rules these companies may not advertise these programs to non-shareholders, unless the company goes through the cumbersome and expensive process of filing with the SEC for permission to sell shares to non-shareholders

Brokers rarely tell clients about the programs because the programs provide no compensation for brokers.

These plans allow shareholders to invest amounts from as little as $10 to as much as $120,000, without paying brokerage commissions. As a shareholder you may participate in a company's plan by sending the amount you desire to invest to the company's DRP administrator. The administrator purchases shares on your behalf on the investment date specified by the company's plan and holds the shares in an account for you. The funds you invest will be used to purchase full and fractional shares of the company.

Most companies require that you own a minimum of one share to participate in their direct stock purchase programs. The First Share Program is a simple low-cost service which allows members to purchase the initial share to qualify for each company's program

What are DPPs?

DPP “Direct Purchase Program” refers to the provisions of a company’s DRIP which allows shareholders to purchase additional shares of stock directly from the company via its transfer agent, in addition to having dividends reinvested automatically. In the early days of DRIPs, an investor had to be a registered shareholder of one or more shares of the company’s stock before the investor could enroll in a company’s DRIP. Today, companies offer DPPs through their transfer agents that allow investors to participate in a company’s DRIP program without previously owning one or more shares. These options, however, can become cost prohibitive as most have minimum initial investments of $200 or more plus an enrollment fee. Many find that it is much more cost effective to become a shareholder first and then enroll in the company’s DRIP/DPP on their own.

Purchasing Your First Share

There are several ways in which you can purchase your first share, including: 1) a company’s direct purchase option; 2) a discount stockbroker; and 3) our First Share program.

We believe that our program is superior to your other options and here’s why:

  • Direct Enrollment Option: The direct enrollment option offered by many companies is convenient; however, in most cases you will be required to make a minimum initial investment of $200 or more, plus pay an enrollment fee of $15 or more, depending on the company.
  • Discount Brokerage: A discount brokerage such as E*Trade will require an initial account balance of $500 or more, a trading commission of $9.99 per trade and a $75 stock certificate request fee. The stock certificate request fee is essentially the cost of registering the stock in your name. This is required to sign up for a company’s DRIP plan.
  • First Share Program: With our program, you will pay one annual membership fee (regardless of number of referral requests), a small referral request fee and a small transaction fee to the seller.
  First Share Program
Best Option
Company Direct Enrollment
Good Option
Discount Broker1
Worst Option
Membership Fee $30/year None None
Minimum Initial Invstment/Account Balance None $200+ $500
Certificate Fee None None $75
Trading Fee/Referral Fee2 $10 $15+ $9.99

1. e*trade.com
2. FirstShare.com sellers may charge an additional fee for transfer costs

Establishing a DRIP Account

Once you have purchased your first share and have completed the transfer process to register the share in your name, it’s time to establish your DRIP account. For this step you will need to contact the company’s transfer agent, either by mail, phone or by visiting the transfer agent’s website. Our company profile pages display the mailing address and phone number for each company’s transfer agent. Most users, however, will find it easier to sign up for the company’s DRIP plan through the transfer agent’s website. Below are the website links for the four largest transfer agents.

Computershare
http://www.computershare.com

BNY Mellon
https://isd.bnymellon.com/isd/faces/jsp/enroll/enrollInterface.jsp

Wells Fargo
https://www.shareowneronline.com/UserManagement/WFIndex.aspx

American Stock Transfer & Trust Company
http://www.amstock.com/investpower/new_plandet2.asp

Some companies, such as The Walt Disney Company, act as their own transfer agents and you’ll need to visit that company’s website directly to establish a DRIP account.

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