Author Topic: DRIPS  (Read 11373 times)

Skinnyneo

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DRIPS
« on: February 15, 2012, 05:13:24 AM »
I have some questions about automatically reinvesting dividends via DRIPS.  From what I understand these programs are free.  I currently use optionsxpress and when I emailed them about setting up DRIP on some of my dividend stocks they said it was a free service.  However when searching the web I came across this website:

http://www.dripadvice.com

When searching this website I found out this information about Coca Cola, one of my dividend stocks.

Purchases:
Minimum purchase  $50

Maximum purchase  $250,000

Fees:
Account Setup Fee  $10

Automatic investment Fee  $2

Optional Cash Purchase  $3

Reinvestment Fee  5% up to $2

Sale Fee  $15

Would I be paying these fees even though optionsxpress.com doesn't charge anything to initiate the service for me or is this for people who go through Coca Cola directly?  I don't own that many shares so these fees might eat up my dividends just reinvesting them.

Sparafusile

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Re: DRIPS
« Reply #1 on: February 15, 2012, 05:16:38 AM »
Read the fine print. There are many different definitions of "free". "Free" as in they don't charge a commission? "Free" as in they don't charge a trading fee? "Free" as in they'll happily take your money for free? If you're talking to a live person, ask them about all the fees that are associated with the DRIP. If you still don't understand, ask them how they make money off you.

jss027

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Re: DRIPS
« Reply #2 on: February 15, 2012, 08:41:10 AM »
I use Sharebuilder....and they automatically reinvest for free.

Chris

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Re: DRIPS
« Reply #3 on: February 15, 2012, 10:17:14 AM »
The information you found there is referring to a Coke-sponsored DRIP program. Some broker offer dividend reinvestment, regardless of whether the dividend-paying company sponsors a DRIP or not. As js027 said, those features tend to be "free".

Jarvis

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Re: DRIPS
« Reply #4 on: February 15, 2012, 03:14:54 PM »
First, a bit about my current investments.

100% of my retirement savings is spread over several index funds.

~50% of my non-retirement investments are in DRIPS, the other 50% are in index funds.  I only buy & hold.

I've been enrolled in DRIP plans for about 2 years, and I'm very happy with them.

On to your question!

Not all DRIPS are completely free, but many are.  Let's take, for example, one of my favorite DRIP stocks right now, Union Pacific:

Initial Setup Fee   $0.00    
Cash Purchase Fee   $0.00    
Ongoing Automatic Investment Fee   $0.00    
Purchase Processing Fee (per share)   $0.00    
Dividend Reinvestment Fee   Company Paid    
Batch Sale Fee   $15.00    
Batch Sale Processing Fee (per share)   $0.12    
Batch Maximum Sales Fee   N/A    
Market Order Sale Fee   $25.00

The only fees associated with this DRIP are sale fees.  I'm a buy & hold investor - I'm not planning on selling for a long time.  What's the trade-off for paying absolutely nothing in commission fees?  You don't get to try and time the market, buying at an exact moment.  But I'm not a silly person trying to time the market, so I'm happy to buy shares automatically every month.

Most of my DRIPS are free, but not all.  I invest in Intel, which charges $2.50 + $0.10 per share on automatic purchases.  I can live with that, because I think it's a good buy, and the price is still better than an online broker.

The majority of my DRIPS are through Computershare.com and BNY Mellon Shareowner Services.  These websites handle DRIP programs for companies.  A few of my DRIPS are run directly by the companies themselves, such as Duke Energy.

Hope this helps!  If you have more questions about DRIPS, let me know.

Skinnyneo

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Re: DRIPS
« Reply #5 on: February 15, 2012, 06:45:50 PM »
Read the fine print. There are many different definitions of "free". "Free" as in they don't charge a commission? "Free" as in they don't charge a trading fee? "Free" as in they'll happily take your money for free? If you're talking to a live person, ask them about all the fees that are associated with the DRIP. If you still don't understand, ask them how they make money off you.

Going off of optionsxpress website FAQ for DRIPS it says "A DRIP lets you take the money you receive when a company pays a dividend and immediately purchase additional shares of that company's stock without having to place an order, pay a commission, or purchase a round number of shares."  I also had a brief email exchange with a representative and he informed me "I am happy to inform you that there is not a fee associated with our DRIP program, we are currently offering this feature free of charge to our customers."

So going off of this I shouldn't see any fees from optionsxpress.  Let's say for a moment that they are honest and really don't charge anything.  Would I still get charged from Coca Cola according to what I was posted on dripadvice.com in the op?  This is my main concern. Sorry if I didn't make this clear. 

@Jarvis

Thank you for the great information!  What brokerage firm do you use?

Jarvis

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Re: DRIPS
« Reply #6 on: February 15, 2012, 07:05:04 PM »
I use Computershare and BNY Mellon for most of my plans.  Every company that offers a DRIP will give the details of the plan on their shareowner services section of their website.  If you're interested in a company, just google their Shareowner Services or Shareholder Information, something like that.

For example, if you google that for Kraft foods, one of the links is: http://www.kraftfoodscompany.com/investor/investing-in-kraft/direct_stock_purchase.aspx

Chris

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Re: DRIPS
« Reply #7 on: February 15, 2012, 08:42:25 PM »
Would I still get charged from Coca Cola according to what I was posted on dripadvice.com in the op? 

No, you wouldn't get charged. Coke has no idea that you're DRIPin'.  optionsxpress is providing you a this feature independent of Coke's DRIP plan. Your broker earns a commission on the initial purchase (of the whole shares) then allocates partial shares to you as dividends are paid. At my broker, they just divide the dividend amount by the stock price on the day the dividend is paid, and add the resulting number of shares to my total.

When you go to sell, you might need to submit a separate request to sell off the partial shares. At my broker there is not additional charge for this either (though they do make their commission on the sell order for the whole shares).

Skinnyneo

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Re: DRIPS
« Reply #8 on: February 16, 2012, 06:07:07 AM »
No, you wouldn't get charged. Coke has no idea that you're DRIPin'.  optionsxpress is providing you a this feature independent of Coke's DRIP plan. Your broker earns a commission on the initial purchase (of the whole shares) then allocates partial shares to you as dividends are paid. At my broker, they just divide the dividend amount by the stock price on the day the dividend is paid, and add the resulting number of shares to my total.

When you go to sell, you might need to submit a separate request to sell off the partial shares. At my broker there is not additional charge for this either (though they do make their commission on the sell order for the whole shares).

Thank you!  Just what I wanted to find out!

MEJG

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Re: DRIPS
« Reply #9 on: February 16, 2012, 07:25:08 AM »
This thread inspired me to go look into DRIPS for the future.  I found this website really helpful:

http://dripinvesting.org/First-Share/First-Share.htm