Tuesday, December 10, 2013

DRIPS Drip Dividend Reinvestment

  New investors that don't have allot of cash can invest in drips. With a DRIP traders have the ability to accumulate shares more cheaply than buying the stock outside the DRIP. Discounts also provide a boost to the stock’s yield. Dividend reinvestment plans are known as Drip’s. Investors can purchase shares of companies like McDonalds’ Nike or General Electric fifty dollars at a time. In most cases, companies charge no commissions for purchasing stocks through their Drips, and those that do charge only a nominal fee. Sometimes investors can send optional cash payments (OCPs), in some cases for as little as ten dollars.
 A number of Drips permit investors to buy stock at discounts to the current market prices. Discounts are usually three to five percent but may be as high as ten percent. Investors have the right to buy attractive blue chip stocks when they
otherwise might not be able to afford them.  Discounts apply only to shares purchased with reinvested dividends, some apply the discount to purchases made with optional cash payments. The main benefit of buying stocks directly from the company either through a Direct Stock Purchase plan or a DRIP program is that the investor doesn't always have to pay a commission when making a purchase as you do with most brokers.
Dividend Reinvestment Plans