DRIPs and DSPPs – Are They Worth Offering to Shareholders?
Dividend reinvestment plans (with additional voluntary cash investment feature) and direct stock purchase plans have been offered by companies to registered shareholders for decades. And more often than not, the board decision to have such a plan in place has been as much philosophical and political, as practical or financial. It often boils down to a hunch that appeasing “mom and pop” by supplying this inexpensive share accumulation tool is worth the relatively modest transfer agent cost to administer the plan. Well, we have a tool of our own that helps a company compare the approximate annual dollar amount of equity purchased through the DRIP/DSPP to the plan’s annual cost to the company – creating a “ratio of equity purchased to cost.” Let’s say your company saw $1,000,000 in annual net stock purchased through the plan (purchases minus sales), compared to an annual plan cost of $30,000. Would that 33:1 ratio help the board and management justify continuation of the plan? Probably. Another way to look at it is for every dollar spent to have the plan, the company added $33.33 of new investment in its stock. If you are a public company and would like more information, contact us at .