ALEXANDRIA, VA (Oct. 7, 1998) -- Both TMF Jeff and I hate to pay fees. I'm of the ilk which will walk five or six blocks out of my way to use my own bank's automated teller machine in order to avoid being charged a user fee at a rival bank's ATM. Hey, those $1 service fees add up! In my opinion, that $1 is lost forever, never to take part in the wonders of compounding returns by being invested in a well-chosen DRP. Besides, walking is good for you.
Jeff, on the other hand, has made it well known in this space that he's not happy with the new DRP fee structure that Drip Port holding Campbell Soup (NYSE: CPB) has chosen to implement. A good portion of our recent discussion with James Volpe of First Chicago centered on the topic of DRP fees, and the bite they take out of loyal investors' wallets. However, I would like to address the flip side of the problem and talk a little about what DRP investors can do to save the companies they are investing in some money.
Probably the number one way to save a company money as a shareholder is to not receive the hefty (and costly) annual report. Before you flame me for this idea, though, allow my to say that I think annual reports are wonderful things. In fact, it's pretty unFoolish to invest in any company without first setting aside a few hours (or days) to review that company's latest rundown of the year that was. But this being the age of the Internet, many companies now offer an online version of their annual report, which is a much better deal for themselves and for their shareholders.
As Peter Lynch once said, "All else being equal, invest in the company with the fewest color photographs in the annual report." By offering its annual report on its website, companies can do Mr. Lynch one better by not only cutting out the frivolous and costly photos, but also the glossy paper and even the costs of bulk mailing an updated three pound tome all over the country every year. Sure the reports make great table leg-stabilizers and impromptu booster seats for the kids. But wouldn't it be simpler for investors to get the same information from the company's website rather than having a printed copy jammed into their already junk mail-stuffed mailboxes every 12 months?
This may sound silly or quaint, but the expenses associated with sending out annual reports to thousands of shareholders every year can add up quickly. As Mr. Volpe told us during our talk, "Annual reports are probably one of the most expensive things for a company. The actual cost of the report itself can range between $1.50 and $10, depending upon what kind of paper or printing or postage is used." And mailing it usually costs $3.00 per copy. Why not save your company a few bucks if you can? Remember, you are an owner of the business, after all.
So if you have access to a computer (and I'm assuming you do, since you're reading this column), save your company some dough by not receiving the annual report. Call the firm's cheerful investor relations representative and ask them how you can get off the mailing list. If they give you the run-around, tell them you are simply being a responsible business owner and are merely looking out for the firm's best interests. If they still refuse to remove your name from the mailing list, tell them that as an owner of the business, you will do everything in your power to have them fired. That should increase the likelihood that you will be removed from the mailing list.
In all seriousness, an even better solution is this: In many cases, companies are now asking you if you'd be happy reading the annual report online. Fill out the card answering "Yes" (or go the company's specified website page and register there), and it's as easy as that.
Another way business owners can help cut costs is to use the online features that several companies are implementing for their DRPs. These new features will enable DRP-pers to not only keep track of their investments online but also to buy or sell shares and take part in proxy votes and other shareholder-related functions by computer. As simple as these features may seem, they were created with the goal of cutting costs in mind. But they won't cut any costs if no one uses them.
Yesterday, Jeff listed in a "Fool exclusive" many companies that are beginning to offer DRP account information online. (For the offerings from yesterday's list of companies, including Johnson & Johnson, go to http://gateway.fctc.com.) If your company is behind the curve on this trend, make some telephone calls or send some e-mails to the powers-that-be explaining why these online features would be a smart and efficient way to communicate with cost-attentive DRP-pers such as yourself. If they hem-and-haw, refer to the handy tips above on how to get yourself removed from the firm's mailing list.
As Mr. Volpe told Jeff and me on Monday, "If investors utilize these services a little smarter, that's going to lower the costs to the company over the long-term. As an owner of the company it lowers your own cost, and that's paid back to you in better returns, better dividends, and a better stock price."