So, I logged into my Computershare account last week and where my holding of P&G stock usually sat with complete price and share information, there was only a message of, No Longer Transfer Agent. “Hmm, that’s odd” I said, “Then who the hell is and where the hell are my shares?” The answer to the who and the where happens to be Wells Fargo and their platform, Share Owner Online. Yes, it seems that Procter & Gamble has revamped their direct purchase and dividend reinvestment plans and along with that of course came new fees! You know, because why continue the same shareholder friendly purchase plan?
I’m by no means a huge PG shareholder, in fact, since I opened the account I’ve only accumulated roughly 7 shares in the company. This is mostly due to price appreciation and my feeling that a solid price per share to purchase is in the lower 70s and not the lower 80s. Nonetheless, I still took advantage of the monthly recurring purchase option for months, buying up smaller pieces of PG, XOM, PSX, and UNP in my Computershare account. Thus, I could invest $150-200 a month in these companies almost without incurring any fees in the process (except for the .02 transaction fee from PG, which, whatever its two pennies).
Over the past year and a half, I racked up roughly 14 cents in total fees while investing thousands of dollars in these companies. Not bad, right? Kind of the purpose of direct purchase plans…to allow for smaller (who become larger) and long-term shareholders in your company to accumulate a position without all of the usual trading fees or at least very few.
Now comes the switch in the PG plan. Listen, I’m not going to say it’s terrible, as I’ve seen much more unfriendly dividend reinvestment plans from corporations but man, I don’t like this strictly on principle.
The New Fees Vs. The Old Fees
The first major change I noticed was the $15 enrollment fee for new accounts. This obviously doesn’t affect me, since I already have an account, but I had to double check to see if I had paid anything to set up my DRIP account under the Computershare plan. Nope, that was completely free.
It seems that new people interested in the plan will have to shell out $15 to get started. When trades a brokerages are under $7.95 and at Capital One Investments, automatic investments are $4.95, that fee becomes real noticeable. For the long-term holder, it shouldn’t be much of an issue, but it reminds me of how pristine a DSPP like ExxonMobil’s is.
Next, are the increases in investment fees:
Investment by check has gone from $2.50 to $5 per investment. OK, I get that increase because it probably is a pain in the ass to process checks these days but Wells Fargo IS a bank and runs this plan now.
The one-time automatic investment fee went from free to $1 per transaction.
The recurring investment fee went from free to $1 per transaction.
Even the 2 cent transaction fee was raised to 3 cents. Is a penny still considered getting nickeled and dimed with fees?
$1.03 per investment really isn’t a big deal in terms of long-term compounding for your investment. However, if you’re an investor who was putting $50 per month into the plan, it does require a change in strategy. It would now make much more sense to now make your purchase quarterly, twice per year, or just make one large purchase whenever the share price dips.
I’ll still probably use the plan to make larger purchases of the stock in the future but there still the matter of the dividend reinvestment and the worst part of this new plan.
Dividend Reinvestment Fees
Under the Computershare plan it was essentially free to reinvest your dividends back into the company, aside from the 2 cent transaction fee.
Under this ‘new and improved’ plan, you now get to pay part of your dividend for the privilege of reinvesting into the company, which you’re a shareholder of.
Each dividend can now be reinvested for 5% of the total up to a maximum fee of $3.
Doesn’t that sound wonderful?
Let’s see what that means for a smaller shareholder like I am currently.
My next dividend should be: $4.68
Minus the 5% fee: $0.23
Plus the transaction fee: +$0.03
Total: $4.42 or a 5.6% reduction
In total terms, this is a minuscule amount but in percentage terms, that is quite a chunk. Also, consider that PG raised the dividend by only 1.1% recently, so a 5.6% reduction is like going back in time a few years for a lower total yield. This is my biggest gripe with the new plan and why I’ll be taking my dividends from this company in cash going forward.
I do still like the company as a long-term investment and will probably be buying larger chunks of shares through this new plan in the future to keep costs down BUT the whole dividend thing is troubling. It was already a let down to get a 1.1% increase when compared to other companies (like the 26% increase I’ve gotten from PSX after two dividend raises) but geez, what’s with all the fees? This crap about better customer service is kind of like getting the finger too, there was nothing wrong with Computershare and I’ve never had a problem dealing with them. Ah, well, so goes another (almost) free option for direct investment.