In a previous post, I discussed the benefit of investing in stocks directly using dividend reinvestment plans (also known as direct purchase plans, direct reinvestment plans, or direct stock purchase plans – there are some slight pragmatic differences here, but nothing that should prevent you from getting started and enrolling). In this post I would like to go into more detail on a specific method of direct investing. This involves buying stocks directly using MoneyPaper.
MoneyPaper is the name of an online and print magazine that publishes directories of direct investment plans listed on American stock exchanges. It also includes Canadian and other foreign stocks (eg., Toyota, Nestle, BP) in their ADR (American Depository Receipt) form on the NYSE and NASDAQ. Online, MoneyPaper is located at http://www.directinvesting.com.
The MoneyPaper guide is more than just a directory. It also discusses the larger picture of “how to build wealth DRIP by DRIP” by investing without a broker. It explains what DRIPs are, how to create a diversified DRIP portfolio, and how to enrol in DRIPs using the Temper Enrolment Service.
Temper of the Times Investor Services is a broker that specializes in doing DRIP enrolments and is affiliated with MoneyPaper for helping MoneyPaper subscribers get started with their first dividend reinvestment program. It’s only $50 (a one-time charge) for enrolling in a plan through MoneyPaper, and you get half-off ($25) if you’re already a MoneyPaper subscriber. For this reason it’s probably the easiest way to get started investing in securities.
Stocks You Can Buy Commission-Free (No Broker)
The guide lists almost 1,000 different companies and the types of direct stock purchase and reinvestment plans they offer. Some of the more well-known US companies that offer DRIPs include Costco (COST: NSDQ), Domino’s Pizza (DPZ: NYSE), Equifax (EFX: NYSE), Fannie Mae (FNM: NYSE), Home Depot (HD: NYSE), JP Morgan Chase (JPM: NYSE), Mattel (MAT: NYSE), Proctor & Gamble (PG: NYSE) and Texas Instruments (TXN: NYSE). There is quite a selection. With this amount of companies that you can buy directly into, who needs to invest with a broker?
What’s even more amazing, from my own perspective, is that you can even DRIP quite a few foreign companies listed in New York under their ADRs. This is probably the best way to invest foreign, as well. You don’t have to worry about trying to figure out how to buy Chinese companies on the Shanghai or Hong Kong exchanges. Here’s a list of some that already allow DRIPs:
China Eastern Airlines Corp. (CEA: NYSE) -
China Mobile (CHL: NYSE) -
China Southern Airlines (ZNH: NYSE) -
China Telecom Corp. (CHA: NYSE) -
China Unicom (CHU: NYSE) -
Guangshen Railway Co. Ltd. (GSH: NYSE) -
Not all of these companies are 100% fee-free. China Eastern Airlines’ plan, for example, charges $5 (+10 cents/share) for each optional cash purchase. Home Depot’s plan charges 5% on reinvestments of the amount of dividends reinvested (but only up to a maximum of $2.50). Even still, these fees are cheaper than many brokers. And as I explained in my last post, many plans have absolutely no fees at all. These are the ones you want to look out for first. Lehman Brothers Holdings Inc. (LEH: NYSE), for example, pays all fees for reinvestment, certificates and optional cash purchases (although there is a $10 fee to sell if you ever decide to withdraw from the DRIP). These figures are all based on the 18th edition of MoneyPaper’s Guide (pictured above). You should always check the websites of the companies in question (as well as their Transfer Agents) for the most up-to-date figures and information. Some of them do change.
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Some companies allow you to purchase or sell stock directly through them without your having to use or pay commissions to a broker. But you may have to pay a fee for using the plan’s services. Some companies require that you already own stock in the company or are employed by the company before you may participate in their direct stock plans. You may be able to buy stock by investing a specific dollar amount rather than having to pay for an entire share. In that case, you could have your checking account debited on a regular basis to make investments in the plan. Some plans require a minimum amount of investment or require you to maintain specific minimums in your account.
@Jenn – yes, there are a few companies for whose DRIPs you can 100% bypass a broker, but they are not many. Usually you need a first share from a broker (or through a friend). And as for DRIPs with fees? Forget it – I don’t think they’re worth it. Might as well go the regular broker route – especially for Americans, for whom there are so many ways to do cheap trades with online brokers.