How to Invest in Stock through a Direct Purchase Program - dummies

How to Invest in Stock through a Direct Purchase Program

By Paul Mladjenovic

If you have your sights set on a particular company for your stock investments and have only a few bucks to start out, a DPP is probably the best way to make your initial investment. The following steps guide you toward your first stock purchase using a DPP:

  1. Decide what stock you want to invest in and find the company’s contact information.

    Say that you do your homework and decide to invest in Yumpin Yimminy Corp. (YYC). You can get YYC’s contact information through the stock exchange YYC trades on. If YYC trades on the New York Stock Exchange, you can call the NYSE and ask for YYC’s contact information, or you can visit the NYSE’s website. So, you can contact the NYSE to reach YYC for its DPP ASAP.

  2. Find out whether YYC has a DPP.

    Call YYC’s shareholder services department and ask whether it has a DPP. If it does, great; if it doesn’t, ask whether it plans to start one. At the very least, it may have a DRP. If you prefer, you can check out the company’s website, because most corporate websites have plenty of information on their stock purchase programs.

  3. Look into enrolling.

    The company will send you an application along with a prospectus — the program document that serves as a brochure and, hopefully, answers your basic questions. Usually, the enrollment forms are downloadable from the company’s website.

    The processing is typically handled by an organization that the company designates (known as the plan administrator). From this point forward, you’re in the dividend reinvestment plan. The DPP acts as the entry point to the dividend reinvestment plan so that you make future purchases through the dividend reinvestment plan.