Investing through direct purchasing plans
For the novice investor, theres little doubt that investing in mutual funds is easier than investing directly in stocks. However, for the patient investor who is willing to take his or her time, and learn by doing, investing small amounts in companies with direct stock purchase (DSP) plans can be quite rewarding. And, a lot more fun than those efficient, but dull, mutual funds.Hundreds of companies have dividend reinvestment plans (DRIP), which, if you own stock in a dividend-paying company, will automatically reinvest cash dividends into additional whole or fractional shares of the company with little or no transaction cost. This is a great low-cost way to keep regularly investing small amounts of money.Around 300 of these DRIP companies will even directly sell you the initial shares. It is these DSP companies that I am recommending in this column. You dont need a brokerage account; you deal directly with the company or through its transfer agent. Charges can run as low as $5 for a purchase, and many companies cover all of the costs for share purchases from both, reinvested dividends and optional cash purchases. Some companies even offer plan participants discounts on the share price.Ive picked ten dividend-paying, blue-chip stocks, which would provide an investor with a diversified portfolio. All allow the direct purchase of initial shares. Do some additional homework on these suggestions by checking them out in a value line report (available in our local public libraries) or online through your favorite investment Web sites. Plan details can be obtained by calling the indicated phone numbers. The initial direct purchase minimum amount is in parentheses:
Bank of America (BAC) 800-642-9855 ($1,000) ChevronTexaco (CVX) 800-842-7629 ($250) CVS Corp. (CVS) 877-287-7526 ($100) Duke Energy (DUK) 800-488-3853 ($250) Exxon Mobil (XOM) 800-252-1800 ($250) FedEx Corp (FDX) 800-466-2617 ($1,000) Kinder Morgan (KMI) 800-847-4351 ($250) Kimco Realty (KIM) 212-495-1784 ($100) U.S. Bancorp (USB) 888-778-1311 ($250) Washington Mutual (WM) 800-234-5835 ($500)
These quality companies are ranked as four to five star (highly rated) stock recommendations by Standard & Poors and pay an above-average dividend rate. Bank of America is a super-sized financial services institution that operates nationally. U.S. Bancorp is a large regional commercial bank with a major presence in the mid-west. CVS operates the well-known retail chain of drug stores. Duke Energy is a large electric utility in the mid-Atlantic region. Im sure youll recognize Exxon and ChevronTexaco as two of the largest worldwide operators in the oil business. FedEx needs no introduction to most readers. Kimco is one of the most respected property real estate investment trusts (REITs) in the U.S. Here in the Vail Valley, those of us who heat with natural gas are customers of one of energy-related services provider, Kinder Morgans, affiliates, KM Energy. Lastly, Washington Mutual is the nations largest thrift institution and a major player in the mortgage lending sector.For more information on using direct stock purchase and dividend reinvestment investing strategies, I would refer readers to two reliable sources that have provided advice on the subject matter for many years. Vita Nelson began her The Moneypaper newsletter back in the 1980s. Her Web site http://www.moneypaper.com is worth checking out. You can also use the toll-free number 800-388-9993 to get details on the content of her newsletter.The other authority on DSPs and DRIPs is Charles Colson. Hes written a number of books on the subject, and his Web site, http://www.dripinvestor.com, is also informative. For more details on Colson, call 800-233-5922.When it comes to stock investing, Id recommend a walk-before-you-run approach. Using direct stock purchase and dividend reinvestment plans are definitely a good way to start.The Investing Wisely column is written by Richard Loth, managing principal of Mentor Investing and an independent registered investment adviser. Loth can be reached at firstname.lastname@example.org or 328-5591.