DRIP PORTFOLIO

The Drip Portfolio
Brokerage "Drips"
A much different animal

By Vince Hanks (TMFElwood)

NORTHVILLE, MI (Nov. 11, 1999) -- I'd like to address a subject that has been surfacing on the message boards quite a bit lately, causing a bit of confusion for many new Drippers, and that's the animal known in these parts as a "Brokerage Drip."

Many brokers are now offering what they refer to as a "Drip," in which they will reinvest your dividends, usually at no charge. However, these "Drips" are significantly different from company-sponsored Drips such as those we hold in the Fool Drip port.

If you elect to participate in your broker's "Drip" for a stock you hold in your brokerage account, be aware that you are not enrolling in the company's dividend reinvestment plan. Stocks held in a brokerage account are not eligible for company-sponsored Drips since they are held in the broker's name rather than in yours. Shares must be registered in your name if you wish to participate in the company's Drip.

Brokerage "Drips" usually do not invest in fractional shares. Instead, the dividends will accumulate in your account until the sum required to purchase a whole share is present. With a company-sponsored Drip, however, your dividends are immediately invested in the stock.

Last, but certainly not least, brokerage "Drips" do not provide the option of making optional cash purchases (OCPs) of stock. This is the ability to add regular, small amounts to a position, taking advantage of dollar cost averaging, for little or no commissions. Any additional purchases of stock in a broker's "Drip" would incur the usual brokerage commission.

If you're interested in reinvesting dividends only and do not wish to purchase shares in whole-dollar amounts on a regular basis, then brokerage "Drips" are an easy and generally inexpensive method for doing so. If, however, you want to take full advantage of the benefit of Drip investing, you'll want to be sure you're enrolling in the company-sponsored plan as a shareholder of record.

Related Links:
How a Fool Can Invest in Drips
Drip Basics message board
Drip Companies message board

Drip Portfolio

11/11/99 Closing Numbers
Ticker Company Dly Pr Chg Price
CPBCAMPBELL SOUP-5/16$44.69
INTCINTEL CORP7/16$79.44
JNJJOHNSON & JOHNSON13/16$103.81
MELMELLON FINANCIAL CORP1/16$36.88

  Day Week Month Year
To Date
Since
7/28/97
Annualized
Drip .42% -2.36% .66% 18.93% 35.26% 14.09%
S&P 500 .58% .82% 1.36% 12.38% 47.15% 18.36%
S&P 500(DA) .58% .82% 1.36% 12.96% 49.78% 19.28%
S&P 500(DCA) n/a n/a n/a n/a 25.42% 10.39%
NASDAQ 1.31% 3.06% 7.78% 45.82% 103.70% 36.41%

Trade Date # Shares Ticker Cost/Share Price LT % Val Chg
9/8/9721.0839INTC42.592$79.4486.51%
11/14/9711.258JNJ79.965$103.8129.82%
11/5/9825.5267MEL34.137$36.888.02%
4/13/988.174CPB54.586$44.69-18.13%

Trade Date # Shares Ticker Cost Value LT $ Val Ch
9/8/9721.0839INTC$898.01$1,674.85$776.84
11/14/9711.258JNJ$900.24$1,168.72$268.48
11/5/9825.5267MEL$871.40$941.30$69.89
4/13/988.174CPB$446.18$365.28($80.91)
  Cash: $24.38  
  Total: $4,174.52  


Key
• S&P 500 (DA) = dividend adjusted. Dividends have been added to the total return of the index.

Note
Drip Port launched with $500 on July 28, 1997, adds $100 to invest every month, and the goal is to own $150,000 in stock by August of the year 2017. Due to the slow nature of dollar-cost-averaging and our relatively significant starting costs, we do not expect to seriously challenge the S&P 500 for the first three to five years as we build an investment base. The long-term advantages of dollar-cost-averaging still overcome the short-term disadvantages, however. Final note: our investment in Campbell Soup is frozen due to fees instituted in its investment plan. Click here for a history of all Drip Port transactions.