Buying stocks directly from the companies

Andrew Leckey

December 18, 1992|By Andrew Leckey | Andrew Leckey,Tribune Media Services

No broker required. It's possible to buy stock from a number of U.S. companies without paying any commission. Direct first-time stock purchase programs permit you to buy your initial share or shares directly from the company, then add to your investment regularly, if you wish.

These programs differ from conventional dividend reinvestment plans, in that they don't require you to make the initial share purchase through a stock broker.

Fewer than a dozen firms offer direct first-time purchase programs to all investors. Another 15 or so provide programs only to their own customers or state residents. (Other firms have direct first-time purchase programs which charge a fee.)

Procter & Gamble, which began its direct stock purchase program in 1987, has seen participation grow to 110,000.

"Our minimum first-time investment is the current market value of one share of our stock," explains James Huffman, assistant manager of shareholder services for Procter & Gamble. "We then allow optional cash payments as low as $2 an investment, to a maximum of $120,000 a year."

Exxon Corp., which initiated its program last March, even offers an individual retirement account that invests in its stock.

"In our direct stock purchase program, you buy directly from Exxon without commissions after making an initial stock purchase of $250 to open your account," says Peter Townsend, vice president for investor relations with Exxon. "Additional investments can be made with as little as $50."

It's a way to broaden a stock's appeal. "The companies tend to be consumer-oriented, for these programs generate shareholder loyalty and draw in individual investors," says Sumi Kinoshita, an editor with Evergreen Enterprises, which publishes a dividend reinvestment directory.

The type of firm makes a difference. "Banks and utilities are the largest participants because they generally require large amounts of capital to run their operations," says Charles Carlson, an editor with Dow Theory Forecasts Inc., in charge of its monthly DRIP Investor newsletter on dividend reinvestment.

Check out both the firms and plans carefully before investing.

"Remember that when choosing a company for direct stock purchase, you need a stock in which earnings and dividend prospects have good long-term records," advises Joseph Tigue, managing editor of the Outlook investment letter from Standard & Poor's Corp.

Both Carlson and Tigue give their highest recommendations to the programs and shares of Procter & Gamble and Johnson Controls. Companies permitting first-time direct purchase of their stock to any investor, according to DRIP Investor, include:

* Arrow Financial Corp., Glen Falls, N.Y., regional banking company with offices in New York and Vermont, (518) 793-4121.

* Atmos Energy Corp., Dallas, supplier of natural gas, (800) 382-8667.

* Citizens First Bancorp Inc., Glen Rock, N.J., commercial banking holding company, (201) 670-2454.

* Exxon, Irving, Texas, (800) 252-1800.

* W.R. Grace & Co., New York, chemicals, (800) 647-4273.

* Interchange Financial Services, Saddle Brook, N.J., bank holding company, (201) 703-2265.

* Johnson Controls, Milwaukee, producer of automated building

controls, (414) 287-3956.

* Procter & Gamble, Cincinnati, (800) 742-6253.

* Texaco Inc., White Plains, N.Y., (914) 253-4000.

Several publications spotlight all types of dividend reinvestment programs, including direct first-time purchase.

Dow Theory Forecasts Inc., 7412 Calumet Ave., Hammond, Ind. 46324-2692, charges $59 annually for a subscription to the monthly DRIP Investor, which also includes the book "Buying Stocks Without a Broker" (McGraw-Hill, New York: 1992).

The Standard & Poors' Corp. Directory of Dividend Reinvestment Plans is $39.95. Address is 25 Broadway, New York, N.Y. 10004.

The Evergreen Enterprises Directory of Companies Offering Dividend Reinvestment Plans is $28.95 at P.O. Box 763, Laurel, Md. 20725-0763.

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