Advice on Dividend reinvestment plans (DRIPs)

Discussion in 'Investments' started by Yowza, Jun 30, 2015.

  1. Yowza

    Yowza New Member

    Posts:
    5
    Hi all,

    Does anyone have experience investing in Dividend reinvestment plans?

    How do you go about investing in these as it's directly with a company and not through a broker?

    Where would I find a list of companies that offer a DRIP service?

    Finally, is there any issues doing this from Ireland?

    Thanks
     
  2. Brendan Burgess

    Brendan Burgess Founder

    Posts:
    30,949
    I don't think that this should be the basis of stock selection.

    If you think that Company X is worth investing in, you should invest in it whether it offers a DRIP or not.

    I sign up to them where available e.g. CRH and BP.

    There is usually a slight discount to the market price. But not enough to make it a basis for selecting that stock over another.

    There are no issues doing it from Ireland.

    The dividend is taxed as normal.

    It's just a question of investing the net dividend in the share.

    Brendan
     
  3. Yowza

    Yowza New Member

    Posts:
    5
    Thanks Brendan. I'm not looking at it as the sole reason for selecting a stock etc. Can you elaborate on 'I sign up to them where available e.g. CRH and BP'? What is the process for signing up to CRH or BP?
     
  4. Brendan Burgess

    Brendan Burgess Founder

    Posts:
    30,949
    I have shares in CRH
    I don't want the dividends in cash.
    So I have signed a standing instruction for them to pay me the dividend in new shares.
    With every notice of a dividend, I get a form which I can send back if I want to change the instruction.

    I am sure I can do it online as well.

    Brendan
     
  5. rob oyle

    rob oyle Frequent Poster

    Posts:
    410
    If your shares are held through online brokers, like Davy Select, you simply have to inform Davy's that you wish to opt for scrip dividends rather than cash once the shares are in your account.
     
  6. sunnydonkey

    sunnydonkey Frequent Poster

    Posts:
    103
    "If your shares are held through online brokers, like Davy Select,"

    Are such shares in broker nominee accounts or in your own name?
     
  7. rob oyle

    rob oyle Frequent Poster

    Posts:
    410
    With Davy's, they're in separate accounts and Davy's broker elect to receive scrip dividends for shares when notified. So not in your name with the company's shareholder register.
    I'm not sure about other brokers.
     
  8. AAM_MENDES

    AAM_MENDES New Member

    Posts:
    2
    Hi Brendan,
    I am just seeking some clarification on your comment.
    Do you deal with the company directly and not through a broker to reinvest your dividends?

    Not every broker offers the option of DRiPs.

    I have shares in companies (mostly on the NYSE) that pay dividends and I would like to reinvest them however my broker does not offer a DRiPs facility.
    I then contacted the company directly and they will reinvest dividends but only through their designated agent. All this involves acquiring my stock certificates etc

    Did you have to do any of this with your CRH shares?

    Do you know of a brokerage firm that offers DRiPs
     
  9. sunnydonkey

    sunnydonkey Frequent Poster

    Posts:
    103
    Just for accuracy, please note that there are two mechanisms which essentially achieve the same objective - Scrips and Drips. A scrip dividend is where a company pays you a dividend in newly issued shares, a drip is where the company takes your dividend and uses it to buy shares in the market. There are no dealing fees for Scrips and low dealing fees for Drips.
    Only a minority of companies offer these and you will need to check their website to verify if its possible and then inform them of your choice.
     
  10. AAM_MENDES

    AAM_MENDES New Member

    Posts:
    2
    For an investor with a long time frame eg 20-30yrs DRIPS are more benifical due to compounding.

    I dont want to set up a dividend reinvestment through the actual company as they charge fees and not every company facilitates DRIP directly.

    If it is possible to open a trading account with certain American brokers you can instruct them to use any dividends earned to repurchase proportions of shares.
    You may not earn enough through dividends to buy one full share in one quarter but you will eventually you will accumulate enough to buy a share.
    All the while you are purchasing fractions of the company until you reach one full share.

    A lot of American brokers do not charge fees to do this.

    I contacted some Irish brokers and their fees are astronomical in comparison. Some will reinvest a dividends back into a company but only unless you earn enough to buy one full share outright. They also charge a trading fee for this.

    This method is completely pointless. With all the fees you will pay it defeats the purpose.

    Im looking for a broker who offers DRIP with UK and US shares. I am finding it very hard to find any European broker who facilitates this for a competitive fee compared to a US broker.

    Can anybody offer me some advice please.

    P.S. I dont want to have move to America in order to do this!!