Direct Stock Purchase Plans are Convenient But Watch the Fees

For many investors buying stock directly from a company is an easy and convenient way to accumulate shares. You do not have to pay commissions to a broker and you can easily reinvest dividends and purchase shares automatically in specified dollar amounts. With direct stock purchase plans you do not have to own any shares to enroll in the plan. You buy your first and remaining shares directly through the plan. Some of the many well-known companies that offer direct stock purchase plans include: Eastman Kodak (EK), Home Depot (HD) and International Business Machines (IBM).

But you should understand the fee structure of a direct stock purchase plan before you enroll because some fees are very steep. For example, you can buy shares of Campbell Soup (CPB) for modest fees but to reinvest dividends in its plan, you must pay 5% of the amount reinvested, up to a maximum of $3.00 plus a commission. These fees may seem small but they add up over time particularly if you have only a few shares in the plan. On the other hand Progress Energy (PGN) and Phizer (PFE) charge no fees for their plans.

For a comprehensive list of direct stock purchase plans see Computershare, formerly called EquiServe. Here you can research and enroll in direct stock purchase plans. NOTE: Computershare also lists many companies with dividend reinvestment plans in which you must own at least one share to enroll.