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Hi All!

I'm new here. A post on another board has made me revisit the issue of DRiP investing. I've been reading some of the old posts and I see many use either SH or B&H. Could I please get some feedback on why posters might prefer one over the other?

I am considering investing $500 per month, i.e., $100 into 5 different companies. I like the smell of the one that lets you buy up to 6 stocks per month for a flat fee. DRiPping direct to the individual companies would be just too much administration for me.

Thanks!
Lieve
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No. of Recommendations: 8
DRiPping direct to the individual companies would be just too much administration for me.

*sigh*

The extent of administration required for an individual DRIP is to place the statements into a file once a month (or once a quarter) at the bare minimum. Plugging the numbers into a spreadsheet or financial program (like Quicken or Microsoft Money), which takes about 5 minutes per month per DRIP, is more than adequate. In other words, if you can balance a checkbook you are more than capable of handling the paperwork for a DRIP, and considering how much money you can save (and thus invest) over the years by doing so it is more than worth the effort.

Mike


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Mike is right if you can balance a checkbook you can do DRIPs.

DRIPs are for anyone who prefers to make their own mistakes rather than pay a broker to make mistakes for them.

DRIPs are basically a way to get more money working for you rather than giving it to someone else (the broker). Brokers would argue that they offer "expert" stock picking advice which justifies their commissions. I respond: "If your stock picking ability is all that great why aren't you rich and retired?"

I DRIP more stocks than are listed here, but these are the ones I feel comfortable recommending. When you do your due diligence you'll find about half of the stocks are utilities and the other half REITs. I feel utilities are safer (if you pick them carefully) and I like REITs because they pay high dividends. There's also a bank stock in there because I'm trying to diversify.

I own the following stocks through DRIP plans:
PNY 24+ years of increasing dividends.
(Gives 5% discount on reinvested dividends through its DRIP plan.)
WTR 10+ years of increasing dividends.
(Gives 5% discount on reinvested dividends through its DRIP plan.)
SO 54 consecutive years of paying dividends.
PGL 9 years of increasing dividends.
ASO 30 years of increasing dividends.
ATO Good solid dividend paying utility stock.
KSE Good solid dividend paying utility stock.
WRE 34+ years of increasing dividends.
FRT 37+ years of increasing dividends.

Starting a DRIP online is easy.

We have an active utility board here at TMF:
Industry Discussions / Energy & Utilities

And we have an active REIT board here at TMF:
Industry Discussions / Real Estate Inv. Trusts: REITs

I highly recommend you read them both regularly.





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I use SB but only for my IRA, for those stocks I can't get thru a regular Drip and for those whose Drip fee is more than SB's. I decided on SB over B&H because at the time I made my decision B&H was raising its price more frequently so I figured on SB being the better deal. That being said, I would never use SB for any company that gives a discount on reinvested dividends. They don't participate in those things or at least they don't pass the discounts thru to the account holder if they do so that would be like passing up free money. I have nothing against using them, or any broker, if they are necessary to get what you want but I also try to keep fees to a minimum and pay no more than 2% of a transaction in fees so I stick mainly to the low and fee free Drips and use SB only when necessary and at $4 a trade never for a transaction lower than $200.

herb
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use SB only when necessary and at $4 a trade never for a transaction lower than $200

I second Herb's statement. I use both DRIPs and Sharebuilder. I use SB mostly for dollar-cost-averaging into ETFs (but stick to the max-2% transaction fee rule). I use DRIPs for companies that are shareholder-friendly - no fees on dividend reinvestments and none (or minimal) fees for other purchases. SB is good for stocks that don't offer DRIPs or for DRIPs that charge fees. Remeber that thru SB you can only buy stocks once a week though at the reduced rate (but you can buy real-time for more). However, if you're considering DRIPs then market timing should not be important for you.

Keep in mind that a lot of the fee structures might change because one of the major transfer agents, EquiServe, was bought by Computershare. EquiServe has a lot of shareholder friendly plans while most on Computershare charge fees.
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I use DRIPs for companies that are shareholder-friendly - no fees on dividend reinvestments and none (or minimal) fees for other purchases



could you elaborate on some companies that are shareholder friendly, I am also considering using sharebuilder because i am unsure of which companies to DRIP, not just based on returns but on fees, minimums, etc.
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If you go to www.netstockdirect.com you can look the features of various DRIP plans by entering the ticker symbol (or looking it up via their search option). Many company websites also have this information in the "investor relations" area.

Don't invest in a DRIP simply because it has a low fee, make sure the company itself is worth the investment. Research the company first, then check out the fees and decide how to invest in it (DRIP, Sharebuilder/BuyandHold, etc). That being said, there are many companies that have fee-free DRIPs... so you should be able to find at least one or two worth investing in amongst that group.

Mike
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could you elaborate on some companies that are shareholder friendly

You can go to the EquiServe website (http://www.equiserve.com/) and in the "Buy Stock Direct" section of "Shareholder Services" you can search for plans that offer online initial investment and have no purchase fees. There is also a pre-built screen for plans that have no optional cash fees. You can also check out plans on company websites in their investor relations sections, other transfer agents (AST, Bank of NY, Computershare, Mellon, etc.), and some DRIP-specific websites.
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Thank you all for your very helpful and informative replies. I have some more research to do!

Thanks!
Lieve
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ml519, Go back and read my post # 25587 ALL of the companies with DRIP plans I mention there are FEE FREE!
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I just wanted to re-emphasize that DRIPing doesn't require huge administrative headaches.

There's two big concerns to DRIPing:

Cost basis when you sell shares: (not dealt with unless you sell shares). It's quite possible to invest in DRIPS and enjoy profits from them (via dividends) without selling any shares. Even if you do sell, it's not as scary as it always sounds.

Paying taxes on dividends. Each company makes this easy, as you get an annual statement that shows exactly how much in dividends you've earned for the past year. Take those numbers for all your DRIPS and, now you have your taxable dividends.

Administrative work in a spreadsheet or program like Quicken takes minutes for each statement (if that). Companies usually pay out dividends quarterly, but, they pay in different months in the quarter). I have 9 companies, some of which pay in October, some in November, and the rest in December, for this "quarter". This spread is the same throughout the year. So, it's mostly a matter of sitting down for 2-5 minutes per _month_, rather than fussing with piles of statements all at once.

It's also quite possible to throw your statements in a shoebox or file folder and only glance at them at tax time. Of course, you can't throughly evaluate how your company is doing and whether it might be time to sell or choose a better investment. No one 'recommends' that you buy and forget a company, but, it's reasonably possible to do so with a DRIP.

About the only big negative I can see to DRIP investing is that it takes a reasonable amount of time to set up an account (2 months is reasonably common) and to buy shares (usually a few weeks). Some people sincerely don't have the patience to wait that long.

Good luck, whatever you decide. This board (and the sister board "Drip Investing - the companies") is a great resource for getting started, and if you decide buying stocks through a discount investor is the way to go, then, there are other great boards here at the Fool.

Gwen
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Though you are thinking of using Sharebuilder or Buy and Hold,
think about Equiserve also. Once you select the companies you
want to DRiP, look to see if you can set them up with Equiserve.

I drip KSE, WTR, & XOM with Equiserve, which are good companies
and are fee free. I was set up in minutes with no hassles. All allowed
me to start with an initial investment of 25 or 50 dollar. Each month
they transfer out the money and I only have to do is punch in the
purchases into Quicken to follow my investments.

This is just a 3rd option to consider. Take your time and do your homework.

-- MrMax --
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Lieve I'd have to share Mike's view. Back when I was in college, not so long ago, I too was a bit nervous about the paperwork for Drips, but it's not much different than being organized for your own household payments (cell,cable/satelite,car payments,etc) but with the BIG added reward that you usually are not paying for additional shares, or at least much less than any broker (even the $7 I get with Scottrade) will charge you. I recommend you think over the possibility of maybe not spreading out the $500 on a monthly basis, but maybe starting with 1 share or two to get your feet wet (say JNJ, which I did), get a bit excited (because you will) about getting your dividend reinvestment statements, and then months and years go by and you will probably end up with a nice little stash. You can then reverse your dividend reinvesments and most likely have them direct depostied to your checking account.
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