One of the big drawbacks of investing and something you must stay vigilant about are the transaction costs and various fees associated with it. High fees can absolutely cripple you returns in the long run and create a huge difference in what one’s retirement may look like. Some mutual funds that are actively managed are absolutely notorious for racking up the fees and destroying the value of being an investor in that fund. For individual stock investors, there are plenty of options for brokerages which offer very low trading costs. However, sometimes an investor wants to put money into a company over the long-term and one way to do this is by investing directly with the company, through a direct stock purchase plan (DSPP) or dividend reinvestment plan (DRIP). Obviously, the best direct stock purchase plans are those which have no fees and low investment minimums, so smaller investors can dollar cost average in to a stock with $25-50 a month contributions and reinvestment of any dividends.
How do you invest in direct stock purchase plans? Most companies have their DSPP or DRIPS held through a transfer agent such as ComputerShare or Wells Fargo’s Share Owner Online. You fill out an application and meet any requirements to get started (such as a minimum investment) and you’re off to the races (it can take a few weeks to process everything). Shares in these plans are usually invested within 5 days of your money being deposited into the program (once you’ve already been accepted) and shares are purchased at the market price that day. You don’t get to buy in real time like you would with a brokerage. However, because these transactions are processed in bulk, you do get alloted fractional shares instead of having to buy whole shares all at once.
In this post, I want to present to you a list of DSPP and DRIP’s with varying low or no cost fee structures. If you don’t see the stock you want to invest in on here, do a search on Google for that companies plan, read the prospectus, and see what the associated fees are with their plan (if they have one). These companies plans are current as of this posting and are subject to change at the whim of the company (see: Procter & Gamble changes DSPP). Many utilities companies seem to have very low cost or free investment programs, so that might be a sector to research further. Also, check out websites like loyal3.com which features no fee buying and selling of certain company’s stocks, there are literally dozens of options and investment begins for as little as $10.
As always, the mentioned stocks do not constitute investment advice. I’m not advocating you purchase any of them, do your own research, accept the risks associated, etc. Full disclosure: I own XOM, UNP, and PSX stock currently.
Some major company’s DSPP’s with No Fees
- ExxonMobil (XOM)
- Phillips 66 (PSX)
- Conoco Phillips (COP)
- Dr Pepper Snapple Group (DPS)
- Marathon Oil (MRO)
- Marathon Petroleum (MPC)
- Union Pacific (UNP)
- Aqua America (WTR)
- Otter Tail Corp. (OTTR)
DSPP with Initial Set Up Fees and then Free (or very low fees, such as a $0.02 transaction fee) thereafter
- Kellogg (K)
- General Mills (GIS)
- Bank of America (BAC)
- PPL Corp (PPL)
- McCormick & Company (MKC)
DSPP with small transaction fees and/or initial set up fees
- Duke Energy (DUK)
- General Electric (GE)
DRIP (Dividend Reinvestment Program) with No Fees
Dividend reinvestment programs are for current shareholders to invest more money in the company. So, if you’re not a current shareholder, you usually have to buy shares through a brokerage and then have those shares transferred into the DRIP service agent. Some of them also might be closed or for employees only, so check each company’s prospectus that you may find a plan for. For example, I know Johnson & Johnson requires the purchase of one share of stock before you can enroll and you would then probably have to pay your brokerage to transfer (depending on their pricing policies) it into the JNJ DRIP which is through ComputerShare (and is also very low cost but not free). There are many other DRIP’s with low fees but these are the one’s with no fees that I found:
- Dow Chemical (DOW)
- WP Carey (WPC)
- Wisconsin Electric Power Co.
- 3M Company (MMM)
- Sherwin-Williams (SHW)