The number of overseas companies offering Drips has grown significantly over the past few years, allowing Drip investors in the U.S. the ability to include a little international flavor to their portfolios.

Foreign companies offering shares on the U.S. exchanges trade as either an American Depositary Receipt (ADR) or they are directly listed if they originate from those companies that allow the trading of shares worldwide. The majority of directly listed, or "New York" shares, as they're sometimes called, are from The Netherlands.

ADRs were born in 1927 as a result of British law prohibiting British companies from registering their shares overseas. American Depositary Receipts are certificates issued by a U.S. Depository Bank, representing foreign shares held by the bank. An ADR may represent one share, a partial share, or many shares.

American Depositary Receipts trade just like any other stock on the U.S. exchanges. Dividends, if any are paid, are distributed in U.S. dollars, and customary tax forms are issued. ADRs may be "sponsored," meaning the company provides financial information, assistance, and in some cases, subsidization of the ADR administration. "Unsponsored" ADR's receive no such assistance.

There are now more than 200 foreign companies that allow U.S. investors to buy shares directly through their dividend reinvestment plans. In fact, out of the top ten ADRs held, eight of them offer a Drip. Those eight are:

Although ADRs trade on the U.S. Exchanges, they carry with them the same political and economic risks as the underlying foreign shares and will be affected by currency fluctuations. Also, information regarding foreign companies is not as easily accessible and it's not always easy to understand. Many foreign companies do not report financial results quarterly and foreign currencies can sometimes make direct comparison to U.S. companies difficult.

Investors should also keep in mind that foreign Drips and direct purchase plans usually have higher fees associated with them than their U.S. counterparts.

If you're looking to add a little international diversification to your portfolio without the inherent risks of foreign stock exchanges, Dripping in an ADR might be for you.

Drip on, Fools!