Drip Mailbag (Drip Port) February 19, 1999

<THE DRIP PORTFOLIO>
Drip Mailbag
Plus, Touchstone Friday

by Vince Hanks ([email protected])

NORTHVILLE, MI (Feb. 19, 1999) --

"Every morning I get up and look through the Forbes list of the richest people in America. If I'm not there, I go to work."

-- Robert Orben

It's time once again to dip into our reader mailbag and answer the questions of Fools worldwide. First up, John, a Fool from San Jose, California writes (edited in the spirit of brevity):

"All this talk about Dripping. What's the big deal? Give me one good reason why I should Drip."

Well, John, I could give you one good reason why you should Drip stocks, but we at the Fool like to overachieve a bit. Therefore, here's the Top Ten Reasons Drips are Appealing to Fools:

10. Virtually anyone with a long-term savings plan can invest in the stock market. Most plans require owning only one share to begin and monthly contributions can be as low as $10 a month for some stocks.

9. Drips are a cost-effective way to reinvest dividends -- purchasing more shares of the company rather than accumulating in a money market account -- usually fee-free.

8. Commission-free investing. 'Nuf said.

7. Dollar-cost averaging, or as Jeff calls it: Time Diversification. Buying in equal monthly dollar amounts leads to purchasing more shares when the stock falls and less when it climbs. As a Dripping Fool, you cheer both events.

6. That catchy jingle: "I'm a Dripper, he's a Dripper, she's a Dripper, we're a Dripper, wouldn't you like to be a Dripper, too?"

5. Ability to easily diversify. Without Drips, it would be nearly impossible for those with limited funds to invest in the individual stocks of several different industries. Drippers, with just $100 a month, can purchase the first share and begin contributing to companies as diverse as Coca-Cola (NYSE: KO), Intel (Nasdaq: INTC), Harley-Davidson (NYSE: HDI), Clorox (NYSE: CLX), and Johnson & Johnson (NYSE: JNJ). In less than five months Fools can be part owners of five distinct industry-leaders.

4. About 100 companies allow investors to purchase stock at a discount to the current market price via Drips.

3. Can proudly wear a T-shirt proclaiming: "I Dripped my way to an early retirement!"

2. Drips encourage and even somewhat "force" investors to save money by offering automatic debits from bank accounts. Often this money isn't even missed as it compounds and grows.

And the Number One reason Drips are appealing...

1. The Fool Drip community is the finest collection of intelligent, amusing, helpful individuals on the cyberplanet!

Next up, Kelly, from West Virginia writes:

"I have a Drip with Lucent and they announced an intention to acquire Ascend. The deal is said to be accretive to earnings in 2000. What does "accretive" mean and is that good or bad?"

Good question, Kelly! Accretion is growth by external addition. The company believes that the union of the two companies will increase earnings above the costs associated with the acquisition. A merger that is immediately accretive to earnings is ideal for shareholders, however in Lucent's (NYSE: LU) case, it expects the merger to be neutral to earnings in 1999 and accretive in 2000. I'd say not a bad deal for you and fellow Lucent owners.

Finally, a Fool named Chuck asks:

"One of my Drip stocks is going to split two for one later this month. Will my partial shares split also? If not, what will happen to them?"

Yes, your partial shares will split. Remember that even though you own a portion of a share, there truly are no "partial shares." The share that you own a part of will split and your portion will split as well.

This is good to remember in unequal splits, also. A three for two split will lead to the liquidation of any odd shares held, for the same reason -- shares cannot be truly partial. If you have 15 shares that split three for two, the odd share (the 15th) will be liquidated and the proceeds will go to you.

Touchstone Friday. An abbreviated market week due to President's Day on Monday, so we began on Tuesday with Jeff finishing off (literally) Kerr-McGee (NYSE: KMG) and introducing Pennzoil-Quaker State (NYSE: PZL) as our next pageant contestant.

On Wednesday, Jeff finished the preliminary examination of Pennzer State. Click back to see if the dipstick (the examination, not Jeff) came up a quart shy or if we'll be seeing more of our nation's largest oil seller in the second round.

Mmmm. Mmmm. Not-So-Good? Campbell's (NYSE: CPN) ladled out its second quarter earnings this week and Jeff served them up to us with crackers on Thursday. Recent woes could mean discount prices for long-term buyers or maybe a sign of trouble ahead. We still believe in the long-term prospects of the company, and that's why for us, holdin' is golden.

Have a Foolish weekend!

[To discuss these columns, please visit the Drip Companies message board on the Web.]

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