Education Center

Optional Cash Purchases

The real advantage of a DRIP comes from the fact that you can make additional purchases in the DRIP with little or no commission. These purchases are known as "Optional Cash Purchases" (or OCPs).

DRIPs usually make OCPs on a set schedule. For instance, a company may purchase and sell shares for all DRIP account holders on the business day closest to the 15th of each month. The DRIP prospectus will outline the schedule of sales and purchases, as well as provide the deadline that cash must arrive at the DRIP administrator in order for a purchase to be made that month. You should remember to time your OCP checks to arrive only a few days prior to the investment date, since DRIP accounts don't pay interest on cash they're holding for new purchases. If you miss the investment date, your money will be held until the next month.

Fees and commissions on OCPs vary widely, as do minimum amounts that can be invested. Check the prospectus of the plan for more information.

Automatic Investing Plans
More and more companies are offering "automatic investing plans" to enable their DRIP participants to make regular purchases of stock. Shareholders can establish a link between their bank account and their DRIP account. Each month, a sum is automatically transferred from the bank to the DRIP and then invested in additional shares of stock.

Companies such as Pacific Telesis Group, Exxon, and Coca-Cola offer automatic plans for investors.