Our 12 DPPs - Considering the DRIP Option

If nothing else, I hope we have shown by now that it does not take a lot of money to get started investing in Stocks. Heck, you don't even a broker!

But, one of the criteria we are interested in is not only how we can buy stocks of some of the best companies in the world without a broker but how we can do so as efficiently (or cheaply) as possible.

A Direct Purchase Plan allows us to bypass the broker to get involved with a companies Dividend Reinvestment Plan (DRIP) but, another way to get started in a companies DRIP program is to already be a shareholder of the company (with the stock registered in your name).
The best part about many DRIPs is that quite often you only need to own a single share of stock before enrolling in a DRIP. So, what we are going to do next is to look back over the companies we have already examined for their DPP details and now see how many shares we must own of each company before we are eligible to enroll in their DRIP. In some cases we will see that purchasing a single share of stock outside of a companies DPP and then enrolling in the DRIP can be a less expensive way of getting started, especially when compared to the Initial Purchase amounts necessary. Also, for the remaining 15 stocks in the DOW currently under our consideration, they only can be started by already owning stock in the company.

Min Number of Shares Required to Enroll in DRIP

Company Name	Symbol	Shares to Qualify
American Express	AXP	10
Caterpillar	CAT	1
ExxonMobil	XOM	1
General Electric	GE	1
Home Depot	HD	1
IMB	IBM	1
McDonalds	MCD	10
Merck	MRK	1
Pfizer	PFE	1
Proctor & Gamble	PG	1
Wal-Mart	WMT	1
Walt Disney	DIS	10

For 9 out of the 12 companies listed we only need to own one share of stock before being allowed to enroll in the company's DRIP. For a company like Pfizer this is a worthwhile option to consider, especially if you don't have the $500 necessary to cover the Initial Purchase price required for joining through the company's Direct Stock Purchase program.

In order for your share of stock to be considered valid for joining a DRIP program it must be registered in your name. When you buy stock through a broker the stock is generally held in what's known as "street name" which means the name of your broker would appear on the certificate instead of your name. For extra fees most brokers could get the stock put in your name but, there are companies which specialize in such services. The two we will currently consider are found at www.DirectInvesting.com and through the Low Cost Investment Plan offered by that National Association of Investors Corporation (NAIC) which can be found at www.BetterInvetsing.org.

At DirectInvesting.com to obtain a single share of stock you'll pay the price of the stock, a 10% cushion to cover any price fluctuations between the time you submit your order and the actual time the stock is purchases, a $40 fee and 50 cent commission. If we continue with our example of Pfizer we would have the following total cost for PFE if bought via DirectInvesting.com

Company	Price	Shares	Cushion	Fee	Comm	Cost
PFE	$27.56	1	$2.76	$40	$0.50	$70.82

If you become a member or buy a subscription to certain publications listed at the site then you can have the fee dropped to $20 which would make the above purchase only $50.82, about 1/10th of the $500 required for the DPP option. The cheapest membership option I could find which still offered the lower fee was the Drip Club Membership for $75. A complete list of membership options may be found at the Subscription Options page. Direct Investing has 1,293 companies listed from which 1 to 100 shares of stock can be purchased. Another nice feature is that if a DRIP is offered for the company you are purchasing then DirectInvesting.com will automatically enroll you in the Company's DRIP.

The other option is via BetterInvesting.org which, according to page 45 of their September issue of BetterInvesting magazine, has a fee of only $7. Now, with DirectInvesting you can buy a share of stock whether you are a member or not by simply paying the $40 fee. With BetterInvesting.org you have to be a member to get the $7 fee option. A one year membership to BetterInvesting is $50 and renewals are $25/year. With BetterInvesting you will also get a years subscription to BetterInvesting magazine, full access to their website BetterInvesting.org and a host of investment educational opportunities. A membership to BetterInvesting is required to get into any of their Investment clubs and another great benefit is that you can go to www.betterinvesting.mystockfund.com and make a stock purchase each month completely free of charge for one year.
To me, it seems like joining BetterInvesting.org is the better alternative to DirectInvesting.com however, I am currently not sure of exactly which or how many stocks are available through BetterInvesting.org so, I recently joined the organization to find out and as soon as I get my membership number I'll be sure to post back more details about the BetterInvesting Low Cost Investment Plan (LCIP).
For now, I am under the impression that the LCIP might be paper based which can be inconvenient but, in the BI magazine I've also read that members are given access to a discounted initial purchase required for a company's Direct Purchase Plan.
Besides the fee difference in the two programs, the LCIP has you add a flat $10 to cover price fluctuation. Either case isn't too big of a deal because any extra is simply sent back as a check. That's been my experience with DirectInvesting.com ...some time ago DI used to have a new stock every two weeks with a super discounted fee of only $10. I haven't seen that in a while but if anyone knows how to get back on the mailing list for those great deals (assuming they still exist) please leave me a comment.