DRIPS
| DRPs
Dividend Reinvestment Plans
A
Dividend Reinvestment Plan or a DRP or DRIP
as they are commonly called are direct stock purchase plans where
you purchase shares directly from the company instead of through
a stock broker. The name comes from the fact that any dividends
that are earned on the shares you own are re-invested to purchase
more stock rather than issued to you in the form of a quarterly
dividend check. There are 3 main advantages when investing through
a drip:
1.
Dividends are automatically re-invested thus buying you more ownership
of shares.
2.
The cost to participate in drp's are minimal usually just around
$25 to $50 dollars a month. So they are great for small investors
and beginning investors. As well as seasoned long term investors
that want to invest regularly in a company directly.
3.
You can buy a little as one share. There are usually no transaction
fees or minimal transaction fees per purchase so you can also save
on brokerage commissions.
DRIPS
are great vehicles for those wish to purchase shares on a long term
basis.
One
of the minor drawbacks of DRIPS is that the company decides when
to purchase your shares. Sometimes also there is a fee for liquidating
your shares. So therefore DRPS are not good for traders. They are
an excellent and hassle free vehicle for long term investors in
Blue Chip companies.
Most
of the companies that offer drips are larger, well established companies
that offer regular quarterly dividends, such as GE,
Proctor
& Gamble, IBM,
McDonalds.
Utility companies such as Hawaiian
Electric are great companies to take advantage of DRIP investing.
How
to invest in a DRIP
The Best Way to Invest in a Dividend Reinvestment Plan (DRIP)
You
don't need to subscribe to a service or invest in a book to learn
more about DRIPS. Although you may find some helpful and useful
information in these. You can start participating yourself - directly.
It's simple. Here's how...
The
best way to participate in a Drip is to contact the company directly
and ask for their Investor Relations Department. You can
also usually find this information directly on the Company's website.
For example, in visiting the site of Hawaiian
Electric Company above, there is a link for investor relations
and clicking on that link takes you to shareholder services. From
there you'll find all the info and forms needed to start. You can
also call the company you are interested directly, ask for investor
relations or shareholder services and they will mail you a package
to you.
Investing
in drips are becoming more and more popular since people want to
take more control over their investments, and cut out the middleman
such as a broker. They are becoming so popular that even brokerage
firms are now offering DSPs or Direct Stock Purchase Plans and DRIPS
to their customers. However, if you go this route, it defeats the
purpose of participating in a DRIP. Since you would be paying the
broker fees in most cases.
That's
all there is too it...make a list of the top 5 or 6 companies that
offer regular divends that you are interested in owning long term.
Call them or contact them via the web and request more info. Read
each company's DRIP policies and select the one(s) you feel most
comfortable with, and start investing in a DRIP yourself. It's never
too early or too late to start investing. Go for it!
*DISCLOSURE:
This is not a solicitation to buy or sell securities. These are
NOT recommendations to buy or sell stocks or to invest or trade
in any stock, or any other financial instruments. The information
above is not intended to offer any professional investing or trading
advice. This website is not compensated by any of the companies
to promote their stocks. These are just personal opinions. Trading
Pro Files is NOT responsible for any investment or trading decisions
that anyone may make based on any information received from this
website, or any affiliated site, or from any links on the Trading
Pro Files website(s). When investing or trading in any financial
instrument, always excercise extensive due diligence, and investigate
any investment or trade completely prior to commiting any money.
Consult with a financial professional. Know your risk and understand
that any financial trading and investing inherently involves RISK,
and with this risk there is a potential to lose a substantial amount
of money.
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