Most DRP programs require that you are a registered shareholder to enroll. If you want to avoid buying the first share from a broker, consider companies that offer direct enrollment - DSP (Direct Stock Purchase). So how do you do that? Or you can use the Moneypaper online enrollment service to open any DRP Program easily!
Determine if the Company Offers a DSP Option.
You have to determine if the company you are interested in has a direct enrollment option. Let's assume you are interested in Compaq Computer.
Go to: DRP Stock List. Click 'C' on the alpha pad to browse the list, find Compaq. The 'DSP' next to Compaq indicates you have the option to enroll direct without buying your first share from a broker. Stocks indicated by 'DRIP' require that you are a registered shareholder (normally 1 share) to enroll. So you know you can buy Compaq direct. But you don't know the terms and conditions of their program. They are not all created equal.
Get the Prospectus.
It is available from the transfer agent or the company and it describes the plan in detail. It is also free. Drop us an e-mail if you need contact information to get the prospectus.
When you request the prospectus for companies that offer direct enrollment, you will also get the enrollment form. Simply complete the form, return it with your check and your account will be set up.
Why bother reading the prospectus?
You should be informed before you plunk your hard earned money on the table. Terms of these plans vary significantly. Let's look a couple of examples.
If you are investing the minimum, it costs you $5 in fees to buy additional shares of Compaq; That's 10%. No fees with Abbott, you start out on a level playing field. That is part of what you get from the prospectus.
You can see that Abbott is much more fee-friendly than Compaq. May make a difference to you, it may not --- but at least you are making an informed decision.
Compaq research link
Abbott Labs research link
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
