How to Invest in a DRIP Program
One of the most efficient ways to invest directly in stock is through a DRIP, or dividend reinvestment program. This article shows you how to get started.
Other People Are Reading
Instructions
-
-
1
A dividend reinvestment plan allows the dividends that are paid by a stock to be reinvested directly into more shares without charging a commission. There are several ways that you can begin one of these programs, but the first step is of course to choose a stock that you would like to do this with. (Not all stocks offer dividend reinvestment, so your options here are somewhat limited.)
-
2
Go to directinvesting.com to choose a stock that offers this feature. There are other websites that list all DRIP stocks as well. However, do not use any company that charges a fee of any kind, whether it's a setup fee or commission. There are companies and websites available that charge absolutely nothing; you should use one of those instead.
-
-
3
One caveat is that many of these companies do require you to be a current shareholder of the stock, so you may have to buy an initial share or shares through either your broker or online brokerage account. You can purchase only one share if you like, but there is probably a minimum commission that will be charged, so you might be wise to just buy as much stock as the minimum commission amount will allow.
-
4
Once you have your share or shares, get them registered in certificate form in your name. Then you can go back to directinvesting.com or whatever website you're using and enroll in the DRIP program there. You will have to mail your certificate in to the sponsoring company to do this.
-
5
A key issue to remember is recordkeeping. Make certain that you have detailed records of each and every dividend that is paid and reinvested because you will need that information for your tax return after you sell the stock. Also remember to store the cost basis information of your initial stock purchase where it can't get lost.
-
1
Resources
- Photo Credit http://www.flickr.com/photos/tico24/57517238/
