There's also a competitive aspect to it, Carlson notes. Over the years, one of the chief complaints companies had regarding the individual investor was the cost. Because of their small and frequent additional cash purchases, individual investors, many companies reported, cost a few dollars more per shareholder to keep on the books as opposed to their institutional counterparts. But even that aspect of the DRP has changed, Birdsong said. With the individual investor, there's only one mailing.
Birdsong offers a few words of caution for individual investors interested in DRPs.
Some brokerage firms will say they offer DRPs, but actually only offer one aspect of it, such as allowing you to reinvest your dividends at no charge. A real DRP has options, including dividend reinvestment, the purchase of the initial share at low or no commission, and optional cash purchase. If you want to be in a DRP, work with the company or transfer agent directly. If you don't, you won't reap the full benefits. In addition, Birdsong notes, the DRP is for the long-term investor.