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| Dividend Reinvestment Plans (DRIPs) |
Many publicly traded U.S. corporations offer Dividend Reinvestment Plans (DRIPs) as a way for their shareholders to acquire additional shares at a very low cost. DRIP plans enable investors to automatically take any dividends paid by a particular firm and invest those funds back into the company's stock, often at a discounted price. This discount can range from one to ten percent of the stock's current market value. In addition, most DRIP programs charge either very low transaction fees, or in some cases no fees at all.
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- Company managed DRIPs are administered from a firm's
corporate headquarters. They often allow investors to initiate DRIPs without
having previously owned shares in the company.
- Transfer agent operated DRIPs, which involve
companies like EquiServe and Chase Mellon, often provide services at a lower
cost than company run programs.
- Brokerage firm administered DRIPs generally allow
shareholders to reinvest dividends at no cost, even if the company in
question does not have a formal Dividend Reinvestment Plan in place.
However, these brokerage-run plans do not allow cash purchases and the DRIP
plan applies to dividends only.
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