Wednesday February 17, 2010
He is the editor of the DRIP Investor newsletter and is a contributing editor of Dow Theory Forecasts, both published by Horizon Publishing Co.
is the author of eight books, including the best-selling Buying Stocks
Without A Broker (McGraw-Hill), No-Load Stocks (McGraw-Hill), Eight
Steps to Seven Figures (Doubleday), The Smart Investor's Survival Guide
(Random House) and Winning With The Dow's Losers (Harper/Collins).
His comments have appeared in such newspapers and magazines as The Wall Street Journal, The New York Times, USA Today, Newsweek, U.S. News & World Report, The Washington Post, Money, Business Week, Forbes, Barron's, and Kiplinger's Personal Finance. Chuck also appears frequently on CNN, CNBC, and NBC in programs including The Today Show, and on Business Radio Network.
From Chuck Carlson ...
Dividend Reinvestment Plans (DRIPs), offered by about 1000 companies and closed-end funds, are programs which allow current shareholders to purchase stock directly from the company, bypassing the broker and brokerage commissions.
Investors purchase shares with dividends
that the company reinvests for them in additional shares. Most DRIPs
also permit investors to make voluntary cash payments directly into the
plans to purchase shares.
DRIPs have many attractions for
Most companies charge no commissions for
purchasing stocks through their DRIPs, and those that do charge only a
More than 100 companies have DRIPs which permit
participants to purchase stock at discounts to prevailing market prices.
These discounts are usually 3 to 5 percent and may be as high as 10
Most DRIPs permit investors to send optional cash payments (OCPs), in many cases for as little as $10, directly to the company to purchase additional shares.
If your investment isn't enough to purchase a whole share, the company will purchase a fractional share, and the fractional share is entitled to that fractional part of the dividend. OCP gives small investors the ability to buy attractive blue-chip stocks when they otherwise might not be able to afford them.
you have identified a company with a DRIP, in most cases you have to
become a shareholder of record to enroll. This is an important point.
You must have the stock registered in your name, not brokerage or
Once you are a shareholder of record, contact the company for a DRIP application and prospectus. The prospectus provides all the details about the program, including fees, if any; optional cash payment minimums and maximums; investment dates; and eligibility requirements. Chances are, the company will probably contact you once it has your name as a registered shareholder.
The most obvious benefit of DRIP investing is the ability to buy shares without paying brokerage fees. However, I believe that the biggest benefit is that the programs allow anyone, including small investors, to participate in the stock market.
Many individuals wrongly believe that the market is a rich person's game, especially if you want to buy expensive blue-chip stocks. In fact, any investor can begin a stock accumulation program in hundreds of quality stocks via dividend reinvestment plans. Indeed, it's not a stretch to call DRIPs the most powerful investment tool available to small investors.
the most significant success factor in an investment program? Picking
the right investments? Having the proper asset allocation? Controlling
transaction fees? While these factors certainly play a part in long-term
investment success, the single most influential factor affecting your
portfolio is time.
If you think about it, time is really the great equalizer among investors. Time doesn't depend on having "inside information" on a company.
Time doesn't depend on having the
latest computer tools and investment gadgets to pick stocks. Time
doesn't depend on having a seat on the New York Stock Exchange and
seeing the machinations of the financial markets up close.
Time is available to everyone.
If time is the most influential factor on your portfolio's performance, it follows that the most important thing you can do is to get started in an investment program as soon as possible.
investors - perhaps your children or grandchildren fall into this group -
never get into the game because they believe you need a lot of money to
invest or they think the market is "too high."
The problem is that determining whether the market is "too high" is really a loser's game. For example, how many people refused to invest because they thought the market was too high only to see the market skyrocket?
point is that every day you wait to invest, you diminish the value of
the one factor that can help your investments the most - time.
If you're not in the game, get started
Every month, DRIP Investor directs you to the best
stocks carefully selected from among the 1,100+ companies that offer
dividend reinvestment plans. Each issue even features our
single best idea (our "DRIP Analyst" selection) for making money in
And in other highly focused feature articles we
regularly point DRIP Investor subscribers to other high-profit
opportunities.You see, we think it’s our job — in our
selection process — to point you to the very best of the many good
companies that offer these plans.