Everyone likes to get a bargain, and investors are constantly on the lookout for stocks that they see as offering better value than their current share price suggests. What's rare, though, is to see an outright discount on stock that lets you buy shares at a lower price than where the stock currently trades. Franco-Nevada (NYSE:FNV) is one of a select group of companies that give investors access to discounted shares as a reward for their loyalty, but you have to take some additional steps in order to participate in the precious metals streaming company's program and get that discount.

Franco-Nevada's dividend reinvestment plan

The place where you can buy Franco-Nevada shares at a discount is in its dividend reinvestment plan. The company allows shareholders in Canada and the U.S. to participate in the plan, which offers shareholders a convenient and cost-effective way to reinvest the cash dividends Franco-Nevada pays out to its investors.

Calculator with glasses and notebook with word "dividends" written in it.

Image source: Getty Images.

In most respects, there's nothing all that remarkable about Franco-Nevada's dividend reinvestment plan. In order to enroll in the plan, you have to sign up for an account with the streaming company's investor services agent. The process is easier if you own your shares in your own name, because you can undertake to sign up entirely on your own without any outside assistance. However, with most people investing through brokerage companies -- and therefore having shares registered in the name of that financial institution -- it's typically necessary to contact your brokerage company directly to have it enroll on your behalf.

However, the biggest benefit that investors in Franco-Nevada's dividend reinvestment plan get is the ability to have their dividends reinvested in Franco-Nevada shares at a discounted price. The terms of the plan specify that Franco-Nevada has the right to issue shares from dividend reinvestment at a discount of up to 5% from the average market price of the shares over the five-day period preceding the dividend payment date. Currently, Franco-Nevada has set a 3% discount rate for its dividend reinvestment plan.

An example of how the dividend reinvestment plan gets you discounted Franco-Nevada shares

To see how this works in practice, let's take an example. Say you buy 100 shares of Franco-Nevada stock and enroll in the dividend reinvestment plan. Currently, Franco-Nevada pays a dividend of $0.22 per share quarterly, so every quarter, you'll receive $22. Say that the average price at the next dividend payment date is at its current level around $66 per share.

With most programs, you'd simply have the $22 in dividends reinvested at $66 per share. That would get you 0.3333 shares of stock for the quarter. However, with the 3% discount, the dividend payment would get reinvested at a price of about $64 per share. Doing the math, that would get you 0.3438 shares of stock credited to your account.

Every little bit

That might not sound like enough of an incentive to be worth the hassle of enrolling in the plan, but the key to appreciating the discount fully is to realize how long-term compounding can enhance the value of such a benefit. In particular, the slightly larger stock purchase resulting from the discount on dividend reinvestment gives you a slightly bigger total dividend payment next quarter, which results in still more shares of stock being purchased through dividend reinvestment. Over time, the difference can add up dramatically.

Moreover, Franco-Nevada pays all of the costs of the plan. By not having to cut small dividend checks to all of its investors, Franco-Nevada can save money, and that likely provides the funding for much of the discount.

For those looking at Franco-Nevada as a potential investment, the dividend reinvestment plan discount is an added incentive to put money into the precious metals streaming company. But more broadly, investors should look at all of the stocks they own for the long haul to see if they offer similar provisions. Discounts are few and far between, but a few stocks like Franco-Nevada make it worth shareholders' while to look more closely.