For years, cost-conscious individual investors who balked at paying brokers’ fees to buy stocks have propelled the growth of direct stock purchase plans, called DSPs. This desire to cut out the middleman has also fueled the proliferation of Websites devoted to DSPs and DRIPs, or dividend reinvestment plans.
The sites range from the transaction-related, such as Netstock Direct (www.netstockdirect.com), to the purely informational, such as DRIP Central (www.drip central.com). Others offer access to a number of DSPs and DRIPs, but charge fees to provide this service. They also try to sign up subscribers to other, ancillary products.
Jeff Seely, president and CEO of Bellevue, Washington-based Netstock Direct, boasts that his site is the only one that does not charge investors a fee. The firm currently has 1,600 companies offering their DSPs on the site, but charges a minimum fee to only 250 of those companies which post their enrollment materials on the site. They include such well-known companies as BP Amoco (NYSE: BPA), General Electric (NYSE: GE) and Home Depot (NYSE: HD). However, Seely faults firms that serve only as portals to company DSPs. “On the Web today, to get you to the door of a transaction but not open the door is not what customers expect. It’s like going to Amazon.com and not being able to buy the books,” he says.
Here’s the catch with most DSPs, however: they require a minimum investment of at least $250. Others, like Lucent Technologies (NYSE: LU), ask you to plunk down $1,000-an amount beyond the reach of some mom-and-pop investors. Some companies, like IBM (NYSE: IBM), will waive their minimum initial investment if you join their automatic debit plan. IBM’s requires $50 a month for 10 months in lieu of a $500 minimum investment.
There are a handful of companies, however, that do offer one-share purchase plans, which allow investors who have never owned stock in a company because of high initial investment requirements to purchase just a single share. One relatively cheap way to buy such stocks is through the National Association of Investors Corp.’s Low-Cost Investment Plan (www.better-investing.org). Kenneth S. Janke, president of the NAIC, a Madison Heights, Michigan, umbrella organization for investment clubs, says the group offers this one-stock purchase option for 155 companies through its Website. If you are a NAIC member, there is a $7 setup fee to enroll, a $10 price fluctuation fee, plus the cost of one share of the company stock you want to buy.
Among the companies in NAIC’s low-cost program are AT&T Corp. (NYSE: T), Mobil Corp. (NYSE: MOB) and Wendy’s International Inc. (NYSE: WEN).