<THE DRIP PORTFOLIO>
How to Begin
There are new details and new options
by Jeff Fischer (TMFJeff)
ALEXANDRIA, VA (March 31, 1999) -- March ended on a down note, but it was strong overall. For the month, the S&P rose 3.9% and the volatile Nasdaq rose 7.6%. The Drip Port trailed the S&P, up 3.4% in the past 31 days. For the year, the S&P is up 4.6% and the Drip Port is up 0.29%. Harry Jones is beating us with his passive index fund. Doh! (That's a lesson for both the Wise and Foolish -- although over the years we hope to beat Harry Jones into the ground.)
Our strongest stock this month was Johnson & Johnson (NYSE: JNJ), which accounted for almost all of the portfolio's gain. J&J rose from $85 7/16 to nearly $94 on strength in the industry and a more positive outlook for the company. It was unstoppable. Even on down days the thing was often ticking up. We wrote about J&J's 1999 outlook at the end of December (I've linked to that page about 12 times in the past three months -- apologies). Also, by the way, in January we wrote about the big new drug candidates this year for all pharmaceutical companies. Check that out if pharmaceuticals interest you.
Mellon Bank (NYSE: MEL) was a small winner this month. It began March at $68 and ended at $70. Meanwhile, Campbell Soup (NYSE: CPB) and Intel (Nasdaq: INTC) are both about $1 below where they began the month (all that volatility in Intel for no gain -- essentially for no change at all! So it goes.)
Intel and Johnson & Johnson will announce earnings in mid-April, so both companies have been quiet of late (unusual for Intel). Elsewhere, we'll be in on a conference call with Campbell Soup on Monday of next week, so we'll have more to say about the big Soup Guy then. Some of you have asked if we'll buy more Campbell at these lower prices. Of course if you wish to, you should. Don't wait for us. We're half-idiots anyway -- Fools, if you will.
Finally, Mellon Bank just sold its credit card division in a continued effort to focus on strong business lines. That's it with our companies of late. They continue to rake in billions of dollars for shareholders.
Direct Investment Plan (DRP and DSP) Enrollment Services
Given the lack of news and that we're in a transitional phase, today we provide solutions to a commonly asked question, which is: "How do I begin a DRP or a Direct Stock Plan?"
Direct Stock Plans (DSP) are easy: you buy stock directly from the company. But DRPs require you to own at least one share before you can enroll -- a bit more complicated. Even if you already own many DRPs, the following resources are good to know about if you plan to begin more DRPs (or DSPs) in the future.
A handful of services automatically enroll investors in direct investment plans at reasonable costs. With these services, you can save time, hassle, and sometimes money. Enrollment services usually offer both types of direct investment plans, so the following are leading DRP and DSP enrollment services. (With a DSP, however, you certainly shouldn't pay an outside party anything extra to enroll. You can buy directly from the company. With DRPs, however, the help is often welcome.)
First Share (www.firstshare.com). The First Share service links members who are willing to sell single shares in companies to one another in order to enroll in new DRPs. Members pay market value for the stock plus a $7.50 fee to the selling member. Membership in First Share is $24 for one year, $40 for two, and First Share also charges $10 for each transaction, or $5.00 for featured stocks (so each DRP usually costs $17.50 to begin, plus the annual membership fee). More than a few thousand members hold shares in 400 companies, meaning that DRPs of 400 companies are accessible. The program is meant for investors who want to enroll in at least three DRPs.
National Association of Investors Corp. (www.better-investing.org). NAIC began the "Own Your Share of America" program to make it easier for new investors to begin DRPs. Similar to First Share, this not-for-profit organization pools members' resources. NAIC membership is $39 annually and you can start a DRP in 150 companies. A $7 start-up fee applies to each.
Recently, NAIC began its "Stock Service Plan," which serves to duplicate DRPs and DSPs. It offers the program for 250 companies. The companies available are the ones owned by members. Depending on the benefits and flexibility you wish for, you'll pay $36, $60, or $200 annually for membership in the Stock Service Plan. Beyond subscription fees, it usually costs 3 to 8 cents per share that you buy. The primary benefit of the Stock Service Plan is that it offers DRP-like investment in some companies that don't have formal DRPs or DSPs, such as Cisco Systems (Nasdaq: CSCO), Starbucks (Nasdaq: SBUX), and biotech giant Amgen (Nasdaq: AMGN) -- all are Rule Breakers or Rule Makers, incidentally.
Netstock Direct Corp. (www.netstockdirect.com). An innovative young company, Netstock Direct provides information on DRPs and DSPs while allowing registered users to enroll in over 250 DSPs directly through its Internet site. The site is free and it offers information and enrollment forms on over 1000 plans, while more and more companies (beyond the 250 to date) are beginning to offer direct enrollment through Netstock. For Internet users, this is one of the easiest ways to enroll in DSPs and it comes at no additional cost beyond normal plan fees. However, Netstock can't yet help you enroll in DRPs; it provides DRP information and enrollment forms, but you need to buy your first share and enroll yourself. Netstock is ideal for enrolling in DSPs, especially the 250+ offered directly through the site.
Temper of the Times (www.moneypaper.com). If you use Netstock for DSPs, you might use Temper of the Times for DRPs. Temper of the Times offers DRP enrollment for every DRP in existence. Its parent company, The Moneypaper, publishes biweekly newsletters on direct investing. An annual subscription to The Moneypaper is $40 the first year and $70 for each year thereafter. For subscribers to The Moneypaper, most DRPs that you start through Temper have a one-time $15 fee, while some are $20. Temper makes enrollment easy for all 1,100 companies with DRPs.
If you don't subscribe to The Moneypaper, you can still use Temper to enroll in DRPs. The fee is merely increased to $20 per company, rather than $15 plus the hefty subscription fee. At this $20 price, Temper is an option worth considering. For $20 apiece, Temper will buy your first shares and enroll you in as many DRPs as you wish. You're completely hands off.
Other Ways To Invest
Discount Brokers. Of course, you can buy your first share of stock through a discount broker, obtain the stock certificate, request DRP enrollment materials from the company, and then enroll yourself. Or with some DRPs, like Coca-Cola (NYSE: KO), you can automatically transfer the first share that you buy from the broker into the DRP -- straight from the broker. Discount broker SureTrade has no stock certificate fee and E*Trade has a low $5 certificate fee. For more discount broker information, see the Fool's Discount Brokerage Center.
Family or Friends. If anyone you know owns shares in companies you're interested in beginning DRPs with, ask if you can buy a share from them -- and beat it out of them if they say no. Once they agree, they'll simply need to place the stock certificate in their name (if it isn't already), have it delivered, and transfer it to you. You can enroll in the DRP once you have company enrollment forms and the share in your name -- mail the share with the enrollment form.
If you have questions on enrollment options or anything (including astrology), please visit our Drip Basics message board. TMF Elwood and I are always lurking (safely lurking, that is -- no need to fear us) and ready to answer questions.
Until manana, Fool on!
!!!FOOLISH NEWS FLASH!!! David and Tom will be live on CNBC tomorrow morning at 7:40 a.m. ET -- get up early, West Coast! The Fool will have a significant announcement to make tomorrow. (This has been a !!!FOOLISH NEWS FLASH!!!)
The Fool is hiring. Answer the call.