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Stock transfer agents have come a long way in the past decade in terms of what they can do for their corporate clients - and even how they think about their service offerings. Evidence of these changes can be seen in what the better transfer agents consider key "deliverables" to clients these days.
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This is a plan having all the functionality of a Dividend Reinvestment Plan (DRIP), with the added investor benefit of not already having to be a registered shareholder in the company to join the plan (like with a DRIP). Joining a Direct Stock Purchase Plan (DSPP) as a first-time holder of a company's stock can be, as the name suggests, "direct," just by sending in a minimum amount of cash. A DSPP also sends the message, by the absence of "dividend reinvestment" in its name, that reinvestment of dividends through the plan is possible (if the issuer is a dividend payer) but not necessary. What really drives DSPPs are steady, smallish investments of cash by individuals into the company's stock on a hopefully regular basis, including by monthly direct-debit from a bank account. The individual can thus buy stock in small amounts cost-effectively over time (often, at no charge!), eventually amassing a sizable share block; and the company can see its stock price enhanced by these purchases, and even raise substantial equity capital (quietly) if the plan permits original share issuances. Indeed, see our term "Waiver Discount" elsewhere in this section for more information on the capital raising potential of a DSPP. These plans can be structured to meet any public company's budget and goals, and should therefore be offered by every company in our opinion.
Previous Terms of the Month
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