BUYING INTO COMPANY; DIRECT STOCK PURCHASING ON THE RISE.Byline: Deborah Adamson Daily News Staff Writer At Amgen's recent shareholders meeting, executives announced that sales reached a record $2 billion in 1996. Shareholders were happy with management's performance. So happy that one investor stood up and asked when Amgen will start a direct stock-purchase plan. ``I want to give you more of my money,'' the shareholder said, half-jokingly. Amgen officials said the company is looking into the possibility. Spurred by shareholders' demand, a growing number of publicly traded companies publicly traded company A company whose shares of common stock are held by the public and are available for purchase by investors. The shares of publicly traded firms are bought and sold on the organized exchanges or in the over-the-counter market. offer programs allowing investors to buy stock directly. These direct stock-purchase programs Direct stock-purchase programs Investors purchase securities directly from the issuer. are enhanced versions of dividend reinvestment plans Dividend Reinvestment Plan (DRP) Plan which provides for automatic reinvestment of shareholder dividends in more shares of a company's stock, often without commissions. Some plans provide for the purchase of additional shares at a discount to market price. or DRIPs. Last week, Ford Motor Co. unveiled its direct stock-purchase plan, which is an expanded form of its DRIP. ``It's the next generation of dividend reinvestment plans,'' said James Volpe, director of The DirectInvestor, the educational arm of the Securities Transfer Association, an industry trade group. Investors can buy stock directly from companies through both DRIPs and direct purchase plans. But with DRIPs, you need to already own shares to participate in the plan. Nonshareholders must buy their first share from a broker. With direct purchase plans, investors can buy the first shares from the company. The plans also offer extra features such as telephone redemption of shares and options such as whether to reinvest re·in·vest tr.v. re·in·vest·ed, re·in·vest·ing, re·in·vests To invest (capital or earnings) again, especially to invest (income from securities or funds) in additional shares. dividends or to open an IRA Ira, in the Bible Ira (ī`rə), in the Bible. 1 Chief officer of David. 2, 3 Two of David's guard. IRA, abbreviation IRA. account. Hence, direct stock-purchase plans are nicknamed ``Super-DRIPs.'' The idea is catching on, Volpe said. In 1989, only six companies offered direct stock-purchase plans. This year, close to 300 companies provide these plans. In contrast, 850 companies offer dividend reinvestment programs A dividend reinvestment program or dividend reinvestment plan (DRIP) is an equity investment option offered directly from the underlying company. The investor does not receive quarterly dividends directly as cash; instead, the investor's dividends are directly reinvested in . It makes sense for companies to offer these plans because they attract individual investors, who tend to be more loyal than institutional investors Institutional Investor A non-bank person or organization that trades securities in large enough share quantities or dollar amounts that they qualify for preferential treatment and lower commissions. , said Charles Carlson, editor of The DRIP Investor in Hammond, Ind IND Investigational new drug Therapeutics A status assigned by the FDA to a drug before allowing its use in humans, exempting it from premarketing approval requirements so that experimental clinical trials may be conducted. See Phase 1.2, 3 studies, Sponsorship. . ``If you own McDonald's stock, you're likely to buy McDonald's products,'' he said. Also opening the floodgate to these plans are 1994 SEC rulings that set up two pre-approved blueprints for direct purchase programs. They made it easier and faster for companies to start plans. To join a direct stock-purchase plan, an investor fills out an enrollment form and sends in a check to buy shares. There's a minimum initial investment, typically ranging from $250 to $1,000. If you can't meet the minimum, many companies will lower it if you sign up for an automatic withdrawal plan in which a set amount, say $50 to $100, is withdrawn from your account every month and used to buy more shares. A key difference between buying stock through the plan vs. from your broker is that you buy in dollar amounts, not number of shares. With a broker, you specify the purchase of a set number of shares, say 100. If the stock costs $10 a share, you pay $1,000. Under the direct purchase plans, you give the company a set dollar amount, say $250. If the stock is worth $22 a share, you'll buy 11.36 shares. An investor can keep sending in money to buy more shares, but some companies limit the purchases. For Ford, there's a $250,000 maximum per year. ``If you only have a few dollars a month, you can still invest in a high-quality stock,'' Carlson said. Dividend reinvestment plans work the same way, except that you can't purchase your first shares from the company so there's no initial minimum investment. Here are other features where the two programs differ: Purchases. Under DRIPs, your funds will be pooled with others to buy stock either weekly, monthly or quarterly. The price you pay is an average within the buying period. With the direct stock-purchase plans, trades are executed more often, such as daily or weekly, so you have a greater chance of buying within your target price. Sales. When you sell or redeem redeem v. to buy back, as when an owner who had mortgaged his/her real property pays off the debt. The term also refers to paying the amount due and all charges after a foreclosure (due to failure to make payments when due) has begun. shares, DRIPs require instructions in writing. With many direct purchase plans, you can sell shares by phone. Bells and whistles A slang English term for exceptional features in some product. In the computer field, it typically refers to functions in software that may be greatly appreciated by some users, even though they may not be necessary most of the time. . Direct purchase plans give you the option of reinvesting your dividends, which is a must for DRIPs. Many direct plans also offer IRA accounts and loan programs through which you can borrow against your account holdings. Fees. With more features, direct purchase plans also cost more. It's typical to have an initial enrollment fee, usually ranging from $5 to $15. Some have fees for purchase or sale of shares ranging from $1 to $10. There could be an annual administration fee of $2 to $5. ``We're concerned about the fees, which can be steep,'' said Tom O'Hara Tom O'Hara was the first native of the U.S. state of Illinois to break the four-minute barrier for the mile run. He accomplished this feat in 1963 when he ran the mile in 3:59.4. He also held the record for fastest mile in indoor track, which was set when he ran the mile in 3:56. , chairman of the National Association of Investors Corp. in Michigan Michigan (mĭsh`ĭgən), upper midwestern state of the United States. It consists of two peninsulas thrusting into the Great Lakes and has borders with Ohio and Indiana (S), Wisconsin (W), and the Canadian province of Ontario (N,E). . Also, direct purchase and DRIPs aren't for everyone. They are more suitable for long-term investors Long-term investor A person who makes investments for a period of at least five years in order to finance his or her long-term goals. , since trades can't be executed quickly. Another drawback DRAWBACK, com. law. An allowance made by the government to merchants on the reexportation of certain imported goods liable to duties, which, in some cases, consists of the whole; in others, of a part of the duties which had been paid upon the importation. is that an investor has to be a good record-keeper. He or she has to keep all the year-end account statements until the stock is sold. Third, by sticking only to companies offering these plans, you miss out on some great investments - such as Microsoft Corp. Ford Last week, Ford Motor Co. unveiled its direct stock-purchase plan, which is an expanded from of its DRIP. ``It's the next generation of dividend reinvestment plans,'' said James Volpe, director of the DirectInvestor, the educational arm of the Securities Transfer Association. FOR MORE INFORMATION: Free list of companies offering direct stock-purchase programs are offered by The DRIP Investor (1-800-711-7969) and from the web site http://www.netstockdirect.com. You may also request a list from the Securities Transfer Association, P.O. Box 5067, Hazlet, N.J. 07730-5067. Send a stamped, self-addressed envelope. For free enrollment forms and prospectus information of participating firms, call the Direct Stock Purchase Plan Clearinghouse clearinghouse Institution established by firms engaged in similar activities to enable them to offset transactions with one another in order to limit payment settlements to net balances. at 1-800-774-4117. Check with the public library for copies of ``No-Load Stocks'' by Charles Carlson, Evergreen evergreen, term commonly used as synonymous with conifer and applied also to all those broad-leaved plants that bear green leaves throughout the year. Of the latter, most are plants of the tropics, subtropics, and other areas where the growing season is prolonged (e. Enterprises' ``Directory of Companies Offering Dividend Reinvestment Plans,'' and ``Standard & Poor's Directory of Dividend Reinvestment Plans.'' Bookstores carry the first two titles. For the S&P directory, call 1-800-852-1641. To join a dividend reinvestment plan without going through a broker: The National Association of Investors Corp. in Michigan has a stock purchase program. Pay $39 to become a member and you only pay a $7 fee for the first stock purchase. As a member, you also get a 120-page investing manual and NAIC's ``Better Investing'' magazine. Call 1-810-583-NAIC for more information. Or write to NAIC NAIC See National Association of Investors Corporation (NAIC). , P.O. Box 220, Royal Oak, Mich., 48068. SOURCE: Daily News Research CAPTION(S): Box/Drawing Box: (Color) Ford (See text) |
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