3 Blue-Chip DRIP Programs You Should Not Touch

May 09, 2013 10:01 AM ETKO, MO, T69 Comments

I have written before (click here) about how DRIP programs are excellent ways for the small investor to build meaningful wealth over the long term by adding $50, $100, $200 (or whatever the amount may be) to a blue-chip company over time so you can accumulate piles of money over 10+ year stretches as you benefit from your accumulated contributions and the accumulated dividend growth that a well-chosen company can provide.

Of course, as is the case with anything else in life, a deal is only as good as the terms presented. Companies like Exxon Mobil (XOM) and Procter & Gamble (PG) are the friend of the long-term investor because they allow you to have money taken out of your checking account free of charge each month, and they also reinvest the dividends for free. These companies get an A+ when it comes to shareholder friendliness.

But, as you might expect, not all companies allow you to invest on good terms. Today, I want to highlight three of the worst DRIP Programs in the country that you should probably stay away from if you only plan to invest $50-$150 each month because they charge such exorbitant fees (which effectively siphon off your wealth and dilute the effects of compounding).

First off, let's take a look at Coca-Cola (KO). You'd expect this blue-blood company to take care of the small shareholder, right?

Not so. The fees associated with this DRIP Plan are terrible. First, you have to pay $10 to set up an account. From there, you have two options: you can either have money taken out of your checking account each month (which costs $2.00), or pay the company $3.00 if you write a check to acquire Coca-Cola shares. Those terms are terrible. For every $100 you give the company, you're giving away 2-3% of your asset base right off the bat. It's hard to get rich

This article was written by

Income-oriented investor with a focus on cumulative income over a multi-generational period. Special interest in buying "Top 20 companies in the world at a fair price" or great businesses selling at a 30% or greater discount while dealing with a problem that will eventually resolve. You can access my library of 1,200+ financial articles written over the past seven years at "The Conservative Income Investor": www.theconservativeincomeinvestor.com.My best ideas regarding what I'm purchasing are covered over on Patreon:http://patreon.com/theconservativeincomeinvestor

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