10 Stocks Offering DRIPs at a Discount
A free dividend reinvestment plan (DRIP) at a discount is a company-sponsored plan in which dividends are reinvested free of charge at a discount (ranging from 1% to 5%) of the recent stock price. Finding stocks that offer free DRIPs is not a trivial task. They’re out there, but a lot of work goes into searching for, and identifying, these stocks. Older lists also exist in the internet-space, but the (free) ones I have come across are outdated. By outdated, I mean either the current DRIP discount has changed, or the company has discontinued its DRIP discount all together. Nonetheless, I utilized these old lists as a starting point in my quest to find stocks that offer discount DRIPs.
In the first step of my search, I navigate to the stock-of-interest’s webpage and look for a dividend information page. If the dividend info page makes no such mention of a DRIP, I conclude that the company does not offer a DRIP, and move on to the next company. If, however, the company does have a DRIP, then I move on to the second step of my search where I examine the investor relations information to see if a DRIP discount is explicitly stated. In certain instances, this is the case (e.g. EPD). The majority of time, however, the actual DRIP discount is buried within the Prospectus of the share purchase plan. The third step of this process involves obtaining this Prospectus. Usually, the company provides a link to the Prospectus, or informs you as to which company it uses for its shareholder services (e.g. BNY Mellon). The most up-to-date DRIP discount must be obtained by browsing through the Prospectus. Usually, the Prospectus states whether there currently is a discount, and if so, the value of the discount percentage. In rare cases, the Prospectus indicates that to find out the current discount, the shareholder must call company investor relations for the current DRIP discount status. If this is the case, I assume the discount is zero and continue my search.
Enrolling in a company’s DRIP is relatively straightforward, and the specifics of which can be found in a previous article here.
Drip Discount List
The table below lists 10 stocks currently (as of 5/12/2011) offering such a feature. They are in no special order, and just represent the first 10 such stocks that I have come across.
Stock name | Stock symbol | DRIP discount (%) |
First Financial Commonwealth Corp. | 5 | |
HCP | 1 | |
Health Care REIT | 2 | |
Agnico-Eagle Mines Limited | 5 | |
Anworth Mortgage Asset Corp. | 3 | |
Healthcare Realty Trust | 5 | |
Independent Bank Corp. | 5 | |
Nationwide Health Properties | 2 | |
Piedmont Natural Gas Co. | 5 | |
Aqua America | 5 |
Stock Performance
I have written a computer program which operates on historical stock data from Yahoo which computes** the returns of each of the aforementioned stocks at n= 10, 5, 3, and 1 year, respectively, using 3 different methods:
1. Adjusted return - The stock n-year return is computed using the most recent closing price, the n-year closing price, accumulated cash from dividends during the n-years, and assuming 1 share of the stock was initially purchased :
n-year return = (cash + closing price – n year closing price)/(n year closing price) * 100
2. DRIP return - The stock n-year return is computed using the most recent closing price, the n-year closing price, additional purchased shares from dividend reinvestment during the n-years, and assuming 1 share of the stock was initially purchased :
n-year return = ( (final share count *closing price) – n year closing price)/(n year closing price) * 100
3. Discount DRIP return - The stock n-year return is computed using the most recent closing price, the n-year closing price, additional purchased shares from dividend reinvestment at the current discount rate during the n-years, and assuming 1 share of the stock was initially purchased :
n-year return = ( (final share count *closing price) – n year closing price)/(n year closing price) * 100
**In all 3 calculations, the stock price has been adjusted for stock splits.
Results
All returns are compared against SPY for reference. For SPY, the DRIP return and Discount DRIP return are identical since no discount is offered.
return | Adj. (%) | DRIP (%) | Disc DRIP (%) | Adj - SPY (%) | DRIP - SPY (%) | Disc DRIP - SPY (%) | |
FCF | 10-year | 3 | -17 | -15 | -19 | -43 | -41 |
First Financial Commonwealth Corp. | 5-year | -39 | -45 | -45 | -52 | -61 | -60 |
3-year | -40 | -43 | -43 | -41 | -44 | -44 | |
1-year | 14 | 14 | 14 | -11 | -11 | -11 | |
HCP | 10-year | 208 | 292 | 295 | 186 | 266 | 268 |
HCP | 5-year | 75 | 91 | 91 | 62 | 75 | 76 |
3-year | 24 | 30 | 31 | 23 | 29 | 29 | |
1-year | 21 | 22 | 22 | -3 | -3 | -3 | |
HCN | 10-year | 233 | 343 | 349 | 211 | 317 | 323 |
Health Care REIT | 5-year | 88 | 103 | 105 | 74 | 88 | 89 |
3-year | 22 | 27 | 28 | 22 | 26 | 26 | |
1-year | 26 | 26 | 27 | 1 | 1 | 2 | |
AEM | 10-year | 703 | 709 | 710 | 681 | 683 | 684 |
Agnico-Eagle Mines Limited | 5-year | 86 | 86 | 86 | 72 | 71 | 71 |
3-year | -13 | -13 | -13 | -13 | -14 | -14 | |
1-year | 5 | 5 | 5 | -20 | -20 | -20 | |
ANH | 10-year | 175 | 244 | 256 | 153 | 218 | 230 |
Anworth Mortgage Asset Corp. | 5-year | 38 | 55 | 57 | 24 | 39 | 42 |
3-year | 47 | 61 | 64 | 46 | 60 | 62 | |
1-year | 20 | 21 | 21 | -5 | -4 | -4 | |
HR | 10-year | 72 | 79 | 85 | 50 | 52 | 59 |
Healthcare Realty Trust | 5-year | -7 | -7 | -5 | -21 | -22 | -20 |
3-year | -2 | 0 | 1 | -2 | -1 | 0 | |
1-year | 0 | 0 | 1 | -24 | -25 | -24 | |
INDB | 10-year | 119 | 130 | 133 | 97 | 104 | 107 |
Independent Bank Corp. | 5-year | 3 | 5 | 6 | -11 | -10 | -10 |
3-year | 7 | 9 | 10 | 7 | 8 | 8 | |
1-year | 23 | 24 | 24 | -1 | -1 | -1 | |
NHP | 10-year | 229 | 375 | 382 | 207 | 349 | 355 |
Nationwide Health Properties | 5-year | 143 | 168 | 170 | 129 | 153 | 154 |
3-year | 40 | 47 | 48 | 40 | 46 | 46 | |
1-year | 25 | 25 | 25 | 0 | 0 | 0 | |
PNY | 10-year | 131 | 166 | 172 | 109 | 140 | 145 |
Piedmont Natural Gas Co. | 5-year | 51 | 58 | 59 | 37 | 42 | 44 |
3-year | 29 | 31 | 32 | 29 | 30 | 31 | |
1-year | 29 | 29 | 29 | 4 | 4 | 4 | |
WTR | 10-year | 150 | 168 | 171 | 128 | 141 | 145 |
Aqua America | 5-year | 9 | 12 | 13 | -5 | -4 | -3 |
3-year | 44 | 47 | 48 | 44 | 46 | 47 | |
1-year | 35 | 36 | 36 | 10 | 11 | 11 |
As evidenced by the table above, there is (excluding FCF) a larger return differential between the Adjusted and DRIP relative to the DRIP and discount DRIP. However, if an investor wishes to maximize their return, one should take advantage of the discount DRIP as it almost always provides the largest return. For ANH, for example, the 10-year discount DRIP return was approximately 1200 basis points larger than 10-year DRIP return alone.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
