Going directly to a company to buy its stock, bypassing a broker in the process, has become increasingly attractive to investors and firms alike in 1998.

About 425 companies now offer direct stock purchase plans, up from just 52 at the end of 1994. Many foreign firms have joined the trend as well. Investors like the easy initial step of entering a dividend reinvestment plan with the intent to buy more shares without having to buy the initial share through a broker, as in a traditional plan requires. Meanwhile, companies see it as an excellent way to retain registered shareholders and diversify their shareholder base."We have more than 120,000 shareholders enrolled in our direct enrollment plan, compared to the 30,000 we had when we initiated it in 1989 (switching over from a traditional dividend reinvestment plan)," said Douglas Czarnecki, shareholder services director for Texaco Inc., in White Plains, N.Y., whose plan is the oldest among major companies. "We've also boosted the allowable contributions to the plan to $120,000 annually for those enrolled."

McDonald's Corp. was the first consumer product company to offer a direct purchase plan three years ago, and now two-thirds of its registered shareholders participate.

"When you enroll in our plan, the minimum initial investment in a lump sum is $1,000, though if you join our monthly automated deduction plan from your savings or checking account, it is $100," explained Mary Healy, assistant vice president for investor relations at McDonald's. "We want individual investors to own our stock, and we consider it an opportunity to build trust and loyalty."

The downside to these plans is that about two-thirds of the companies offering them now require an initial enrollment fee that varies from $5 to $15, as well as a fee per purchase that can run from $1 to $10 a transaction. A small number also exact an annual administrative fee of $3 to $5. Worst of all, others also charge a fee on reinvestment of dividends, perhaps 5 percent of the dividends reinvested, up to a cap of $2 or $3.

"You have to investigate how you plan to invest in a particular program because the same fee structure can affect different investors different ways," said Charles Carlson, editor of the DRIP Investor newsletter in Hammond, Ind. "A $50 investor paying a flat $5 fee will certainly find the fee more punitive than someone investing $500 or $1,000 a crack."

It might therefore make more sense to either select a more "fee-friendly" direct enrollment plan or instead invest fewer times during the year in a larger amount each time, Carlson advised.

There's an even greater number of plans that permit entering a traditional dividend reinvestment plan by purchasing one share of stock, noted Vita Nelson, editor of the Moneypaper newsletter in Mamaroneck, N.Y. That initial share is typically bought through a broker, though her Temper Enrollment Service for a $15 enrollment fee and 50-cent commission on the stock will obtain the single share you need to join a plan. Nine-hundred companies are included in Nelson's service.

"I think it makes more sense to buy a single share without having to put down several hundred dollars and without having to pay fees to buy more shares," asserted Nelson. "There's been a lot of hype about the other kind of plan because the transfer agents got aggressively involved and they get something every time from it."

Among low-fee direct-purchase plans with minimums of $100 or less, Carlson's favorites are Johnson Controls, Wisconsin Energy and WPS Resources. Another selection, Becton, Dickinson, has a $250 minimum initial investment, but will waive the minimum if an investor agrees to automatic monthly debit of at least $50.

Choosing from traditional dividend reinvestment plans requiring no fees to make cash payments, Nelson recommends a portfolio of Exxon, Franklin Resources, Intel, Philip Morris, Coca-Cola, Johnson & Johnson, Diebold, Harley-Davidson, Sara Lee and Tyco International. For greater diversity, she suggests Phelps Dodge, 3M and Newell as well.

A free listing of all companies with direct purchase plans, their phone numbers and investment mini-mums is available through the DRIP Investor at 800-233-5922. A subscription to the DRIP Investor, 7412 Calumet Ave., Hammond, Ind. 46324, is $59 annually.

The Moneypaper, 1010 Mamaroneck Ave., Mamaroneck, N.Y. 10543, costs $81 annually or $40.50 for first-time subscribers. The phone number is 800-388-9993.