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Newsletter
February |
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Brooke
Stephens offers a monthly newsletter of personal financial advice. All information is
abstracted from Brooke's personal finance book Talking Dollars And
Making Sense. |
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ONLINE MONTHLY
NEWSLETTER February |
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GETTING INTO DRIPs |
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This is the best kept secret of investing
in stocks and no Wall Street broker will ever tell you about it......
You think you'd like to own a piece of McDonald's, the Gap, Kellogg's, IBM, Hershey's,
Sara Lee, AT&T, or your local utiltity company and get back some of those dollars
you've spent on their products and services in dividends, but you can't afford the big
expense of buying 100 shares and paying high commissions to a broker? Relax, here's the
best kept secret in the investing game that can have you playing the market with the high
rollers without having to sell your soul or your first-born child to get into the game.
You can make use of a DRIP - a divident reinvestment plan. DRIPs are the best kept secret
that no stockbroker will ever tell you about. They have been around for more than 50 years
and are the smartest move you can make toward getting rich the slow and easy way on a few
dollars a month. Once you own stock in company, the transfer agent, usually a bank, will
take your dividends and use them - reinvest them - to buy more shares of stock for your
account. You don't buy the additional shares through a stockbroker, so you don't pay a
commission for the purchase.
Many companies require that you buy your first share of stock from a broker, for which you
have to pay a commission, and you must have the stock sent directly to you. If you don't
request that when you place the order for the stock, the brokerage firm will hold the
stock in an account for you and keep it listed "in street name," meaning in the
name of the brokerage house. And if it's not in your name, you can't use a DRIP. It takes
about 5 to 10 business days for this transaction to be settled through a transfer agent,
which is usually a bank that handles the documents and paperwork for the brokerage firm
and the corporation.
Over 900 companies have established these investment plans for shareholders, and many
utility companies make this service available to their local rate payers, without going
through a stockbroker; see table below for some of the more well-known companies that
offer DRIPs. The drawback is the amount of paperwork you will find filling up your mailbox
each quarter and at the end of the year.
Here's some advise if you're thinking of using a DRIP:
- Start small. Choose one or two stocks for companies that are
familiar to you.
- Invest where you spend. Don't look for exotic stocks in strange
industries that you don't understand, like biochemical technology or genetic engineering.
Consider the various products you use in your daily life. What kind of car do you drive?
What toothpaste do you use? Where do you do your banking? If you are willing to buy these
products, why not buy their stocks? Some utility companies allow their customers to invest
directly in their company stock for a minimum of $250 without even using a stockbroker for
the first buy. You know you will always pay the gas and light bill, so why not get back
some of that money by investing in stock.
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30
Well-Known Stocks That Offer DRIPs
Abbott Labs
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Exxon |
Philip
Morris |
American
Express |
Ford
Motor Co. |
Procter
& Gamble |
AT&T
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General
Electric |
Quaker
Oats |
Black
& Decker |
Home
Depot |
Rubbermaid
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Bristol-Myers
Squibb |
Johnson
& Johnson |
Sara
Lee |
Citicorp
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Kellogg
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Texaco
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Coca-Cola
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Kimberly
Clark |
U.S.
Steel |
Colgate
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La-Z-Boy
Chair |
Vanity
Fair |
Delta
Airlines |
McDonald's
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Wendy's
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Duracell |
Merck |
Westinghouse |
The best research you can do on getting
into DRIPs is to contact the following:
The National Association Investor Corporation (NAIC)
at (810) 583-6242 provides its members with a monthly magazine called Better Investing. Each issue gives
guidelines on how to start buying DRIPs from a list of over 150 stocks it recommends. NAIC will assist you with opening the
account and purchasing your first share of stock. You don't have to be a member of an
investment club to participate in DRIP programs, just an interested and consistent
investor. NAIC also manages a no-load mutual fund that includes many of the stocks from
its recommended list.
The MoneyPaper at (914) 381-5400 publishes an annual
directory of the 982 corporations that provide DRIPs for their shareholders. It is well
worth the $25 it will cost you to get a list of all the companies, addresses, phone
numbers, rules, and guidelines for opening an account. If you subscribe to the MoneyPaper newsletter, the company assists
you, for a fee, with opening your first DRIP account from its recommended list.
FirstShare at (800) 683-0743
will assist you both with buying your first single share for a fee of $30, slightly less
than most stockbrokers will charge you, and with doing the research on how to continue a
personal investment program.
The DRIP Investor is an excellent newsletter
for newcomers to this area of investing. It's published by Charles B. Carlson, the author
of How to Buy Stocks without a Broker and No-Load Stocks. For a sample copy,
get in touch with:
The DRIP Investor
NorthStar Financial, Inc.
7412 Calumet Avenue
Hammond, Indiana 46324-2692
(219) 931-6480 (phone)
(219) 931-6487 (fax) |
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