Dividend reinvestment programs have been around for years, while direct stock purchase plans have come into vogue in the past few years. DRIPs allow shareholders to reinvest their dividends instead of getting a quarterly check or deposit, and, better yet, to make optional cash purchases of stocks directly from the company. The purchase part eliminates brokerage commissions, although many plans have fees. Paul Brooks' family investment club, Positive Learning Partners, has been using DRIPs for about six years. There is a catch.
Most plans require individuals to own at least one share of the company before they can enroll.
Investors have a few options. They can buy that share from a broker. Some will allow such a small purchase, although the commissions can be as high as the share price in some cases. There are some services that will get you the first share and enroll you in the plans for a fee. National Association of Investors members can use the group's low-cost investment plan to buy the first share in about 150 participating companies.