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How do you purchase a DRIP stock?

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Quick Answer

You can enroll in a DRIP, or dividend reinvestment plan, directly through a company or use a brokerage firm, explains DirectInvesting.com. Many DRIPs require you to own at least one share of stock to enroll.

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Full Answer

Dividend reinvestment plans are programs that allow current shareholders to purchase stock directly from the company, bypassing brokerage commissions. Many companies don't charge a commission for purchasing stock through a DRIP. The DRIP for several companies allows for purchase of stocks at a discounted price. The discount is generally 3 to 5 percent, according to DirectInvesting.com. DRIP accounts allow a single share of stock to build holdings over time without paying fees.

With a DRIP, an account holder invests the same fixed dollar amount on a regular basis, notes DirectInvesting.com. By investing a dollar amount instead of a share amount, it is possible to buy as many shares as the investment allows instead of paying for the same number of shares regardless of price. By doing this, investors can purchase shares automatically when the market price is low and buy fewer shares when the market price is high. Company websites often offer the information necessary for enrolling in a DRIP, and some companies offer online enrollment. Another starting point for enrollment is to contact the transfer agent for the company, reports DRIP Investor.

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