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BY WARREN BOROSON
NEWJERSEYNEWSROOM.COM
BOROSON ON MONEY
It's nice that many companies offer dividend investment plans (DRIPs), letting you automatically invest your dividends in more stock – usually without commissions. Usually you must own at least one share first.
Well, what about companies that let you buy your very first shares directly – without paying a commission? (DPPs, they're called – Direct Purchase Plans.)
Sounds great, but there may be problems. Sometimes you have to fork over a goodly sum of money, like $250, to buy shares. Worse, there may be ongoing fees whenever you reinvest your dividends.
Charles Carlson, who invented the term "no-load stocks" and who edits the No-Load Stock Investor, tells me that whether the fees should discourage you from buying a stock directly depends on how eager you are to own the stock. And how you invest. If the fee is $5 to $7 and you invest $25 to $50 a month, forget about it; if you invest $200 or $400 or more, you might go ahead. Of course, he points out, some companies charge no fees at all.
"Up to 200 companies add direct purchase plans every year," he says. Companies that have recently added DDPs include Pfizer, Exxon, and McDonalds.Why do companies do it? For loyalty. "If you own shares of Reebok," says Carlson, "you're more likely to purchase its sneakers instead of Nike's. Same goes for the phone service or brand of shampoo you use."
Why haven't you heard about no-load stocks before? Companies offering them are forbidden by the Securities and Exchange Commission from advertising the programs. Adds Carlson, "For obvious reasons, stockbrokers are not about to extol the virtues of these programs."
Carlson is a quick-witted fellow. Years ago we were lunching during a conference at an exquisite restaurant in New York City. He happens to live in some Godforsaken place in Indiana. "How many restaurants like this are there in Hammond, Indiana?" I asked with a sneer. "We have one on every corner," he answered.
Click here for a list of no-load stocks (in PDF format).
You're invited to send questions about personal finance to This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
