Dividend reinvestment plans allow investors to buy a company's shares directly from that company, bypassing brokerage commissions. Such plans have exploded in popularity in recent years, and thousands of companies now offer them. But should you begin a DRIP program with the market at such lofty levels? Yes, says DRIP Investor newsletter.
"But if you're worried about a bear market, stick with bulletproof stocks. They share the following characteristics: 1. Ample size and liquidity. 2. Strong and predictable earnings growth. 3. Solid revenue growth. 4. Good dividend-increase prospects."
DRIP Investor recently recommended six DRIP stocks it considers both bulletproof and attractive long-term investments. These half-dozen industry leaders seem as good a place as any to begin a long-term program.
General Electric is as solid as they come, says DI. "Its strong growth over the years has produced ample dividend increases." GE's direct-purchase plan permits direct initial purchases. Minimum initial investment: $250. Enrollment fee: $7.50. Purchase costs: $3 ($1 if made with automatic monthly investment. 800-786-2543).
Health-care stocks have typically attracted investors' attention during volatile market periods Johnson & Johnson is no exception, says DI. "Record results are expected again this year." Johnson & Johnson's DRIP requires ownership of at least one share for enrollment. Minimum optional cash payment: $25. J&J picks up the fees on investments made with a check.(800-328-9033).
Merck should handily outperform most stocks over the next 12 months, says DI. "And long-term prospects are excellent." Minimum initial investment: $350 (waived if you agree to an automatic monthly investment plan of at least $50. Enrollment fee: $5. Purchase fee: $5 ($2 with automatic monthly debit), plus 1 cent per share (800-774-4117 or 800-613-2104).
SBC Communications is a leading regional Bell company that has significantly broadened its operations through the acquisition of Ameritech. Since it began trading publicly in 1984, it has boosted per-share profits every year. DI believes overseas expansion and plans to become a major Internet provider should fuel growth. Minimum initial investment: $500. Enrollment fee: $10. Purchase fee: $2.50 per transaction (888-836-5062).
Sysco, a leading distributor of food and related products, has posted record revenue and profits annually for two decades. Its DRIP requires ownership of at least one share for enrollment. Purchase costs: $5, plus 5 cents per share (800-730-4001).
Tribune, a diversified media company, has posted higher per-share profits annually since 1992. "And takeover activity in the media sector is giving its shares a big boost," concludes DI. Minimum initial purchase: $500 (waived if you agree to automatic monthly investments of at least $50). Purchase fee: $5 ($2 if made with automatic monthly investment) plus 10 cents per share. (800-924-1490).
(DRIP Investor, 7412 Calumet Ave., Hammond, IN 46324; monthly, $79 annually)
This column is a digest of investment opinion from the world's leading financial advisers. It does not recommend any specific investments, and no endorsement is implied or should be inferred. For more information, contact the individual firms cited.