Happy Thanksgiving week everyone! As of November 23th, 2015, the current Dividend Meter reading is $5,802.97. The increase from October’s dividend figure is attributable entirely to a purchase of 20 shares of HSY (The Hershey Company). On November 13th, I purchased additional shares of HSY at $85.21 per share in my taxable brokerage account with cash from an annual sales bonus that I receive from my employer each November – an appropriate month to be thankful for my job and the income it provides to support my family and then some. The rest of the sales bonus has been set aside to fund my 2016 Roth IRA contribution in January.
November is a busy month for receiving dividend payments from my current stock positions. So far in November, I have received dividend payments from GIS (General Mills), AAPL (Apple), KMI (Kinder Morgan), DFS (Discover Financial), and ETN (Eaton). On November 30th, I expect to receive additional dividend payments from AFL (Aflac), AWR (American States Water Company), PFE (Pfizer), and COP (ConocoPhillips). I’m saving these dividends in the cash portion of my brokerage accounts for now, but will probably use the accumulated dividends in December to purchase a stock that is flashing a buy signal on my spreadsheet. Below is a picture of my current spreadsheet. A few of my “watch list” stocks near the bottom of the sheet are flashing buy signals – it’s likely I’ll establish a new position in December! To all visitors and readers – have a wonderful Thanksgiving, and may your week be filled with gratefulness, joy, and peace in the company of loved ones.
In last week’s blog post, How a Kid Can Buy Stocks, the concept of “DRiP Investing” was introduced. A traditional definition of a DRiP investment is characterized by purchasing shares of stock directly from the underlying company. However, many publicly-traded companies have outsourced the management of their DRiPs to a company called “Computershare“.
I was recently directed to Computershare’s website while researching how my own 9-year son could buy shares of Dr. Pepper Snapple Group, maker of our favorite drink, Dr. Pepper:
Today’s article will explain the process and experience of using Computershare to set up a direct stock purchase plan. Upon visiting Computershare’s website, I honestly felt a bit confused about where to begin to make my son’s first stock purchase. My son and I were tempted to initially click the “Create Login” button under the New Users section; however, the first step is to enroll in a specific company’s stock purchase plan. Look for the “Buy Stock Direct” button, which will take you to a search page. You can search by company name, ticker symbol, or perform an Advanced Search. The Advanced Search is very useful for identifying companies participating in Computershare’s direct stock purchase program and you can filter by a minimum starting investment range; for example, you can find stocks that feature minimum initial investments of between $1.00 – $250.00.
After locating the Dr. Pepper Snapple Group Investment Plan, we clicked the “View Plan” link to review initial investment minimums and fees. Within Computershare, the fees vary from company to company – most have some sort of enrollment fee, very low or zero additional purchase fees, and sale fees that are higher than your average online brokerage firm. The fee structure is optimum for buy-and-hold investors who want to make frequent additional purchases of shares with small dollar amounts. Here’s what the fee summary page looks like:
Clicking the “Buy Now” link from the fee summary page reveals a very simple registration page, with an option to open a Custodial account, a necessary requirement for my 9-year old’s first stock purchase. I was impressed with the simplicity of the registration page. After submitting basic sign-up information, we quickly navigated to the next steps in the process: indicating our initial investment amount, and selecting our preferred dividend reinvestment option:
Finally, we entered our bank routing and account numbers to fund our minimum $250.00 investment. That’s it – the sign-up process only took a few minutes. Below is a screenshot of the confirmation screen. We also received an email with a reference number.
A few days after signing up for Dr. Pepper’s DRiP, I noticed the electronic withdrawal of $250.00 from our bank account. We still had not received the statement by mail that the confirmation message referenced; however, we attempted to go ahead with creating a login at Computershare’s website. To my surprise, it worked! The system recognized my son’s SSN (since it is a Custodial account) and had recorded the initial purchase details for my son’s first stock purchase, 2.739886 shares of DPS (Dr. Pepper Snapple Group), in an easy-to-understand Portfolio summary screen. For those wondering about the $15.00 enrollment fee, it was deducted from the initial investment of $250.00. Below is a picture of the Portfolio screen. There are simple Action links from a pull-down menu that will allow us to make additional purchases of stock for no fees and in increments of only $50.00.
Conclusion: While I still prefer the tremendous overall value, breadth of investment choices, and convenience I receive from two different online brokerage firms, Computershare offers a great investment solution for anyone who wants to buy stocks with low investment minimums and fees. Investors in DRiPs managed by Computershare should be long-term investors, as the fees to sell would seriously put a dent in sale proceeds on such small dollar investments. But for my 9-year old, we share a common bond now, and I hope I’ve instilled in him a desire to save for his future…
While it’s never too late to start investing, it’s certainly better to start as early as possible. Consider this: a single $250.00 stock investment, earning an average of 7% per year, grows to approximately $8.000.00 in fifty years. Fifty years is a long time, but for an investor starting at the age of 9 years old, a $60k account balance at age 59 is possible by simply saving lawn mowing earnings and monetary birthday gifts during his/her adolescent years (just 10 years) and leaving it alone to grow.
Let’s look at a hypothetical example that I hope to make a realistic future my own 9-year old child. By mowing lawns, completing household chores, and saving a portion of cash birthday gifts from relatives, he is currently able to save about $250.00. If he invests the $250.00 per year in stocks for the next 10 years, and earns a 7% average annual return, he will have approximately $3,735.00 upon finishing high school.
$3,750.00 isn’t too exciting, but it’s a great start. Now, let’s examine what happens if the investment is left alone for the next 40 years at an estimated 7% annual return. Without any additional contributions, $3,735.00 becomes nearly $60,000.00…
But how can a 9-year old child invest in stocks with savings of only $250.00? Legally, the child cannot open a stock brokerage account by themselves, and commission charges would be prohibitive. One possible solution is to open a custodian DRiP account for the young investor. “DRiP” means “dividend reinvestment plan” DRiPs allow anyone to get started investing with small sums of money, and they feature automatic reinvestment of dividends in additional fractional shares of stock at no or very low fees. To learn more about DRiP investing, visit The DRiP Investing Resource Center at DRiPinvesting.org – there is an abundance of great information and resources available at the website. It’s also important to understand the characteristics of a “custodian” account – essentially, an adult controls the account until the child reaches 18 or 21 (depending on which U.S. state you reside in). Remember, when your kid reaches 18 or 21 years of age, assumes control of their custodian account, and is tempted to withdraw the hard-earned savings, send them back to this article – for the magic of compounding to work, the investment needs to be left alone!
If you and/or your child have larger sums to invest, consider opening a traditional custodian account with an online discount brokerage firm such as . However, if you only have $250.00 to start with, then using a direct stock purchase plan administrator such as Computershare is an option to begin investing in a DRiP plan.
In next week’s article, I’ll post a detailed review of the account opening process at Computershare. Please know that I have no affiliation with Computershare, or financial incentive arrangement with the organization. I will provide an honest, unbiased review of the experience and will provide account updates in future blog articles.
At Computershare, you have to carefully review the investment plan for each stock – the fees and minimums do vary. It appears the fees to sell shares are actually much higher than a traditional online brokerage firm. However, the higher sell fees may be an acceptable trade-off for years of no-fee purchases and dividend re-investments (depending the stock purchased), and the whole point of this article is to buy and hold for fifty years. I would love to hear comments from readers who have used Computershare or other DRiP plans, please Register and join the conversation…
At the end of October, 2015, the Dividend Meter reading is $5,756.37. This Meter Update is the first in what will be a regular month-end blog post, and will include the months of September and October, as I’d like to summarize all the activity that took place since I first started this blog. The header screenshot, which reflects a meter reading of $5,649.85, was taken shortly after September 3rd, 2015:
In both September and October, I managed to save about $1,000.00 of my income each month to make new purchases, buying 100 shares of DAKT (Daktronics) and 23 shares of ETN (Eaton). Also, dividends that were paid since early September included AVY (Avery Dennison), WM (Waste Management), and DAKT (Daktronics). I choose to not automatically reinvest dividends in my brokerage accounts, but rather let them accumulate in cash and purchase shares in a stock that is flashing a Buy signal when I’ve accrued enough cash to justify a commission expense. (As I reminder, the green Buy cells shown above are my own personal indicators and should not be construed as professional investment recommendations.)
During October, two of my positions, KMI (Kinder Morgan) and AFL (Aflac) announced dividend increases. For your own dividend spreadsheet, I suggest adding conditional formatting to the dividend column, so that when the Google sheet is refreshed, you’ll clearly see which stocks have increased their dividends. In my spreadsheet, I keep a transaction journal on the far right-hand side of the sheet, so being able to identify which companies changed their dividend payout is extremely helpful. After the dividend increase, I’ll update the journal and change the conditional formatting value in the cell to the new dollar amount to remove the green shading.