Dreaded DRIP?

gijoe9 · #1 (**permalink**) 01-28-06, 07:57 PM

Dividend re-investment Plan I have not seen this discussed here and that surprises me a little. A lot of the people on this site are from the US and that is the home of the DRIP IMO. A drip is a tool that can get you into the market for less than you might think and is far less exciting then other methods of investing. Some companies will sell you as little as 1 share of their stock and will accept as little as $10 for each additional investment and the fees for this are nothing in some cases. There are services that will list these companies and if there are fees and what they are. Some companies will even give you a bonus on your dividends re-invested. Some but not all companies that have drips that will allow you to purchase and register directly through the transfer agent. There are some books out there on the subject.
The advantages for a drip are the reduction in fees the initial set up of a drip may be costly but each additional investment will be fee free or a modest fee depending on the plan. The big thing here is that you get to take advantage of dollar cost averaging and over a long period of time it will allow you to accumulate shares of good companies at an average share price price that will be below market price without incurring the fees associated with brokerage companies. If this kind of thing were more available where I live I would still be into it. One of the more recent plans I looked into was for a REIT they were offering a 5% bonus to investors who were inrolled in the DRIP.
The main risk of a DRIP is that it could take time to sell out of it. This risk should not be ignored due to recent developments IE: enron it can take a few days to execute a sale of your stock or it could be a phone call away but the process fees for geting out can be costly if it is a sudden move on your part. You really need to be careful of the plan and any restrictions the company may have on buying and selling the shares.
Plaese post your Pro's and Con's for this type of investment.
Thanks Joe

gijoe9 · #2 (**permalink**) 01-31-06, 06:43 PM

Con's This post is obviously too boring for the average FIO member

lol.
I posted this becasue I know there are some younger members on this site who might be into this knid of thing because you could use your paper route money to start a DRIP. And if you are lucky like my buddy he went for Ips when it was around 10 bucks now at 93 he has 60 shares at about 15 per share plus dividends for the last three - four years so his cost is minimal and it is geting close to 6 k now on an investment of less then 1k nice if you can get it.

JeffBox · #3 (**permalink**) 02-01-06, 02:32 PM

I think my father had a DRIP account set up for me at one point, it is an interesting idea for the long run since it will sort of force you to stick with the company/companies. Illiquidity can be a good thing too sometimes.

gijoe9 · #4 (**permalink**) 02-02-06, 01:02 AM

I started this thread partly to point out an alternative to getting the min $ for opening a brokerage account. The DRIP I believe is a good choice. The big thing with a DRIP is you can start one with $100.00 more or less including your first share.
If you pick a mature company and continue to invest regular amounts on a regular schedule you would be surprised how much value you can accumulate in a relatively short period of time.
If you do not have the money to start you can start with this. I think it is a good way to save money and beats a bank account by a large margin on long term savings. More risky than a GIC or a Gov bond and more risk than mutual fund, but better return in my opinion. God bless dividends and the power of compounding. I am talking about 5 yrs or so.
The other reason I started this thread is because I really wish i would have learned about DRIPs about 27 years ago when I was 15.

oldstocks · #5 (**permalink**) 03-23-08, 08:15 PM

I have a number of boring drips - REITs, utilities. I like the little amount (little pain or notice in the budget) that I put away every month has exploded in the LONG TERM. It is fire and forget and not stressful in the thought that I am saving for later.

Airelon · #6 (**permalink**) 06-29-08, 09:22 AM

Just saw this thread, and thought I'd play a little necro magic.

Sorry.

But it's a topic I recently touched on. Someone recently pm'd me that Dividends didn't matter, and that I wasn't getting anywhere with them. So I made these two little videos regarding Dividends.

The Importance of Dividends Part I

The Importance of Dividends Part II

For the long term, I * cannot * stress DRIP dividend investing enough. You stick with great, large companies for the long term? It's just a fantastic way to accumulate wealth. And when you hit a bear market? And your companies survive the storm? Then bear markets a sheer gift from heaven.

DRIP's are basically the way to take advantage of the principle behind compound interest with the stock market.

Fredledingue · #7 (**permalink**) 06-29-08, 05:40 PM

DRIP is a fantastic tool.

But it make sens only when the total dividens represent several complete shares. Otherwise you will get one or two shares + $13.24. Not very exiting

As I'm in this case, I prefer stashing cash and eventualy do a one time purchase when the prices are depressed. It's like a DRIP except that I do it myself. (But of course I pay commission charges.)