Dividend reinvestment plans for passive income

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Many companies do offer Dividend Reinvestment Plans to their shareholders to purchase stock directly from a company. The deal is done through a transfer agent. The amount of shares bought or sold can be small or large. The purchases usually take place on a monthly basis. The plan acquires it's name from the fact that the buyers often reinvest dividends earned through this program and buy more stocks. Hence the name:" Dividend Reinvestment Plan".

How you invest in a plan like this really depends on the type of plan you have in mind. The good thing about this investment is that you don't need a large amount of cash. If only buy one share, it is enough to enroll you on to the DRP. DRPs are usually a safe bet for many people who don't have the confidence to purchase large amounts of shares. Most DRP shares require no fee handling for reinvestment. If a person wishes to make an investment through the DRP plan they may in rare cases have to pay the nominal fee.

The stock purchase requirements can also be called Stock Purchase Plans or (SPP). Then there is the Optional Cash Purchase( OCP) which enables an investor to send small amounts of money like 10USD to 50USD to buy more stocks.

In the current program there are 100 companies which have DRPs offering stock at a discounted rate. The discounts can be as high as ten percent. There are times when the DRP can insist that investors buy stock on a regular basis and not sell it for a long time.

Investors looking for long term growth usually take advantage of this because the amount of money required is derisory. There are also 200 companies that have packages enabling the investor to make payments into DRP investments through a direct debit bank account.