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Establishing the DRIP Account


Once you are the owner of a share of a company and have the certificate in hand, the next step is to establish a DRIP account with the company. Some enrollment services, like the NAIC's Low Cost Plan, actually transfer the single share into a new account with the participating DRIP company. In other instances, such as purchasing a single share through First Share, the investor may receive an actual stock certificate and then must enroll directly with the company.

In any case, before an investor purchases stock in a company, it would be prudent to call or write the company and request a copy of the DRIP plan prospectus and enrollment form. The prospectus will outline the schedule for optional cash purchases and reinvestment of dividends, fees or commissions involved with buying or selling shares and other pertinent information.

A careful examination of the prospectus is especially important as more and more DRIP companies are levying commissions on OCPs and reinvestments. Many DRIP directories also provide details about the specific procedures a particular company follows in its DRIP plan, but programs change often and it is wise to acquire the most current information from the company directly.

There are several forms of ownership that you can use (if applicable) for your DRIP account.

A common question arises when investors desire to give or purchase stock for their children or grandchildren. Since minors are legally prohibited from owning stock, a custodian must be the owner of record.

The most common forms of stock registration are as follows:

  • Individual Jane Jones Smith
  • Joint Tenants John W. Smith & Jane J. Smith JT TEN
  • Minor Ownership Jane J. Smith, custodian for Mary Ann Smith (child's SS#)
  • Trusts Jane J. Smith, Trustee U/A DTD 4-30-96, Jane J. Smith Trust
  • Partnership XYZ Investment Club, A Partnership c/o John W. Smith