About Direct Stock Purchase Companies

There's an inexpensive method of stock purchase that allows you to buy a smaller amount of shares at an often lower than brokerage account cost. These direct stock purchase companies offer the service through their transfer agents. It's one method that companies offer to increase the sale of their stock but also gives them other benefits.

History

Rejoice that the change occurred in the 1990's when the SEC changed the ruling to allow companies to sell their stock more easily to the public. Before that time most direct purchase plans were for public utilities. Direct stock purchase companies also offer DRIPS, which are direct reinvestment programs.

Considerations

Look for companies to raise capital at a low cost with direct purchase plans. Many companies find that bringing shareholders from the retail sector allows them to raise money at a lower cost and balance the institutional investor influence. You share in the savings because they often offer very low cost fees, frequently cheaper than a broker, and the purchase of fractional shares.

Effects

Stay loyal to the company when you use direct purchase plans. Another reason that many companies offer the shares is to gain the support of Main Street America. They find that customers with small amounts invested, that don't have enough money to start a brokerage account, remain loyal to the brand when they own a bit of the company. Direct reinvestment programs, a method of buying more shares from dividends, is another way companies increase the shareholder's stock.

Significance

Find the information elsewhere, but not at the company's website. Direct stock purchase companies can't advertise its programs because it is against the law. You have to go to the investor relations site and find the name of the transfer agent, then go to the website to get more information. Sometimes companies offer a link to that site.

Identification

Look for companies that offer direct stock purchase plans. There's a website in the resource area that lists many of the companies but is not all-inclusive. If you favor a company and want to purchase its stock directly, check the transfer agent to see if it's available through a direct stock purchase plan. Again, you find the transfer agent by going to the company investor relations website.

Expert Insight

Fill out all the paperwork correctly. The plans offer a multitude of ways to purchase the stock. You can also transfer stock purchased this way. If you handle an estate, you'll probably find that the transfer is quite difficult. Usually after several attempts, the transfer agent finally accepts the work. In all cases, you need a medallion signature guarantee and official court documents to show that you're the executor. If you have a number of different company's stocks purchased under a direct stock purchase plan, it is easier for heirs if you transfer them to a brokerage account before your demise to relieve them of the paperwork.