The process is relatively simple, although it can be confusing at the start. Stock1 does not sell stock, we only provide information. Stock1 lists about 400 of the largest companies that offer dividend reinvestment programs (DRPs). Browse the list at: DRP Stock List.
Each company describes their program in a "prospectus" which provides details like:
- Who administers their program?
- How to enroll in their program.
- The fees associated with their program.
- Minimum and maximum amounts you can invest.
Select the Stock.
The first step is to select stocks that you want to invest in. We follow the large companies (S&P 500 and Dow30 companies) because they have a track record. You can invest small amounts and pay little or no fees.
Selecting stocks to invest in is the most difficult part of the process. Spend time learning as much as you can about the companies and select a few stocks that you feel are good long-term investments. I think past performance and earnings prospects are two key considerations. Use our research links in the "DRP Stock List" to get familiar with the companies.
Get the Prospectus.
Once you select companies that interest you, you should order their prospectus (it's free). It is available from the company or the transfer agent. Read the prospectus to make sure it meets your needs. Drop us an e-mail if you need contact information to get the prospectus.
Registered Shareholder.
Most companies require that you are a registered shareholder to enroll. In other words, own at least one share. The initial share is normally bought through a stock broker. I have found Dean Witter very helpful and reasonable. Some companies give you the option to enroll direct (in other words, buy your initial share through the program), but the conditions are typically not nearly as friendly. Companies that offer direct enrollment are indicated by "DSP" next to the stock lists at Stock1. Check it out at: DRP Stock List.
Transfer Agent.
Once you are a registered shareholder (it takes 6-8 weeks from the time you buy the initial share), contact the transfer agent for enrollment forms. Once enrolled, you will get all the information on how to make Optional Cash Payments (i.e. buy additional stock). You normally get a monthly statement of your account activity from the transfer agent --- with a tear off stub to remit with your check for OCP's.
Enroll in DRP Plans Online
Moneypaper provides an online enrollment service that allows you to open any Dividend Reinvestment Program. Moneypaper makes enrolling fast and easy! Moneypaper opens the plan account for you, and once opened, you invest direct with the company. For more information: Enroll OnLine
In a nutshell, that is the process. It will take time and effort to get your program rolling, but it will be a wise long-term plan.
