Buying stocks can be a difficult proposition if you don't have large chunks of money to invest at a time. However, many companies offer DRIP programs which often allow for small recurring investments as well as the reinvestment of dividends. All you have to do is find a company you want to invest in that offers a DRIP program.
Dividend Reinvestment Plans or Dividend Reinvestment Programs are offered by certain publicly traded companies. These programs allow you to buy stock directly from the company without a brokerage or other intermediary. By design, these programs reinvest all dividends paid back into the company stock.
A DRIP investment program allows investors to invest directly with the company. The purchased stock is held in "street form," meaning that no stock certificates are sent to the investor. The investor may make subsequent investments subject to the rules of the program. When the stock pays a dividend, that dividend is used to purchase additional shares of the stock. In this way, the number of shares owned continues to increase with each dividend payment.
Many websites promote DRIP programs as an "easy way" to invest "small amounts of money." However, many DRIP programs require a minimum investment to start and have minimum amounts for subsequent investments as well. Further, some company's DRIP offerings are limited to current shareholders, meaning that you would need to buy at least one share some other way first. Finally, not all companies offer DRIP programs, so one must find not only a suitable investment, but one that has a DRIP as well.
Investments in DRIP programs are made according to program rules which may result in shares being purchased at different times than the investor intends. Since a major feature of DRIPs is the reinvestment of dividends, it makes sense to evaluate the dividends paid by the company.
It may be difficult to access money invested in a DRIP program should the need for cash arise. Thus, DRIPs are suitable only for investments with funds that are unlikely to be needed in the near future.
Although there are services that will sell lists of DRIP companies, virtually all DRIP programs can be found with just a little research. Major transfer agents provide the majority of DRIP programs. The Investor Relations section on a company's website should list the transfer agent for the stock and contact information for the IR department. Either one can provide the necessary information.
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