Dividend Reinvestment Programs

About Dividend Reinvestment Programs
These programs typically require that you own shares of the company's stock directly, rather than through a brokerage. In the old days, that meant that you had hold actual certificates as proof of ownership. Nowaday, most plans provide for "paperless book" ownership of the shares. While some company's require that you buy your initial shares through a broker, a good many now include a Share Purchase Plan that allows you to buy directly from the company, often without having to worry about commissions.

The basic advantage of these programs, is that you can turn dividend payments into new shares without having to pay commissions. This is particular good if the company's shares have a history of appreciating.

Pros:
 * Helps facilitate dollar-cost averaging.
 * Reduces the expense of commission.

Cons:
 * Each company plan has to be tracked separately.
 * More transactions that have to be kept track of in terms of Cost Basis for capital gains reporting.

As with anything else, the companies responsible for any of these programs should be investigated prior to investing. Also keep in mind that the details of the program can vary from one company to another.


 * Programs available for $250 or less
 * Programs available for an initial investment of $500 or less