Do you DRIP? If not, then you may be falling behind the times
-- and your portfolio might be suffering the consequences.
Don't worry; DRIP isn't the latest dance craze or some new
millennial technobabble phrase. It stands for Dividend
Reinvestment Plan, and they've been around for decades. But as my
colleague Amy Calistri points out in a recent issue of
The Daily Paycheck
, too few investors take advantage of these plans.
For the uninitiated, DRIPs began as a way for companies to
offer shareholders a way to invest directly with them. That means
no broker (or brokerage fees). You can simply buy shares by
enrolling online or by calling directly, and then the company
will reinvest your dividends back into the stock for you.
Many investors aren't aware of such programs, because
companies aren't allowed to advertise them. But today, many
ages offer their own DRIP service, which negates the need to deal
with a company directly. To counter this, some companies will
even offer you a discount on the current share price as an added
perk for being a loyal shareholder and dealing directly with
them. So Amy did some digging to find stocks with DRIPs that
offer a discount to shareholders and shared her findings with
I'll let her take things from here...
As it turns out, there are a number of companies that offer
DRIPs with a discount. They are just really hard to find ...
It's even hard to find them on a company's website. Sometimes
you have to dig through legal prospectuses to find them.
After a few weeks of research, I turned up six companies
that offer a 5% discount on reinvested shares.
Amy's least favorite stocks on this list are Agnico Eagle
) and Toronto-Dominion Bank (NYSE:
). Here's what she had to say:
Like all mining companies, Agnico Eagle Mines has struggled
in this environment of low commodity prices. And today, its
meager 1.1% yield doesn't seem like enough compensation for a
risky sector such as precious metal mining. Toronto-Dominion
Bank's 4.0% yield is tempting, but Canada's economy is
currently in a recession -- another victim of low commodity
prices. And even though TD has done a good job growing its
dividends when valued in Canadian dollars, its dividend valued
in U.S. dollars has been dropping.
Amy went on to note her two favorites of the group:
Independent Bank Corp (Nasdaq:
) and Healthcare Realty Trust (NYSE:
Independent Bank Corp's yield is on the lower end of the
scale, but it has a solid track record for dividend growth --
even through the financial crisis. In the last five years, INDB
has raised its dividend five times, increasing it by 44%.
Founded in 1907, INDB is the holding company for Rockland
Trust Company, providing banking services in Massachusetts and
Rhode Island. Although its territory is small, it has a market
cap of more than $1 billion and has been rated one of the
nation's top 25 healthiest publicly traded banks by Forbes.
Also, if the Federal Reserve actually gets around to raising
rates, keep in mind that banks and insurance companies do well in
a rising rate environment. You can read INDB's dividend
reinvestment plan prospectus by
following this link
If you want to read more about Amy's other favorite --
Healthcare Realty Trust, which yields 5% -- then you'll need to
check out her newsletter,
The Daily Paycheck
We've sung the praises of Amy's dividend reinvestment strategy
time and time again here in StreetAuthority. Simply put, we think
it's one of the easiest, most surefire ways to build long-term
wealth in the market. And by taking advantage of the 5% discount
these companies offer on their share price, it makes Amy's
strategy all the more compelling. To learn more about Amy's
Daily Paycheck Retirement Plan, go here