The sudden switch of Procter & Gamble (NYSE:PG) from Computershare to Wells Fargo has understandably caused a lot of confusion throughout the DRIP investing world. I logged in last week to make my monthly Exxon Mobil (NYSE:XOM) purchase, and to my consternation my account balance was about 33% less than I had expected it to be. Mini heart attack notwithstanding, the account noted that Computershare was no longer the transfer agent for P&G, but provided no clues as to the new transfer agent. Some digging on the investor relations site for P&G showed that Wells Fargo Shareowner Services had taken over the duties from Computershare. Mystery solved, but no specifics yet on how the plans would be affected.
That mystery was then solved when the above linked letter was received by all P&G owners in the mail earlier last week. P&G was one of the best firms on Computershare's roster, and its low fee structure made it all the more appealing. At one point, it was possible to invest $10,000 in the firm and only $4 in fees. Now, as previous authors have detailed, the fees are not large but still have increased dramatically. This dilutes the appeal of creating a direct ownership plan in P&G, and potentially leaves investors with a hole in their DCA investing strategy. Their move was especially disheartening to me, as I grew up in P&G's shadow, and have always looked to have ownership in the firm. They have an incomparable product portfolio, are nearly recession proof, and as a bonus to dividend investors, pay a dividend in the notoriously cash flow light second month of the quarter. I should have probably started my position last summer, but took the jump this past winter in a DRIP due to the price run-up, and now will need to reevaluate in light of the extra increase.
First off, if you are making larger investments in P&G, the fee increase will not be much of a bother. Purchases of $250 and greater will barely notice the additional cost, as the fee for a one-time purchase is $1.00. At $250 or more, this will be only .4% or less of the purchase amount. Instead of getting $249.92 per $250 invested, you will now receive $249. However, the fees will bite hard on smaller purchases, and the 5% reinvestment fee will lower returns on any dividend. You can take the dividend in cash as I do, but one of the purposes of a DRIP is to reinvest automatically without having to incur costs. Most brokerages will already DRIP your dividends with no extra cost.
Other Investment Options
Therefore, this transition and fee increase is an impetus to look around for better DRIP options. At Computershare alone there are several Direct Stock investment plans with no fees attached to them until you sell:
1. Exxon Mobil, as mentioned above, is one such option. Now that P&G has departed, they are one of the best firms that Computershare has plans for. They also charge no account open fees, no purchase fees, company paid reinvestment fees, and only charge $15.00 plus $.12 per share when you sell. As a firm that you hold in a DRIP should be one that you never sell unless you need cash, this makes Exxon a great choice to build wealth in as you will never likely have to incur a fee.
2. Aqua America (NYSE:WTR) is a water utility that has the same fee schedule as Exxon Mobil, however, they also allow you to DRIP your shares at a 5% discount. They are both an excellent firm and operate a great plan for shareholders as well.
3. Becton Dickinson and CO (NYSE:BDX) is a dividend aristocrat healthcare supply firm that always seems to forgotten as they tend to be overshadowed by Johnson & Johnson. In terms of Computershare options, however, they have a superior investment plan. They charge nothing for purchase or re-investment, and charge $15.00 plus $.15 per share when you go to sell. BDX is a bit overvalued right now, but a DCA program through Computershare is a great way to negate some of the overvaluation.
4. Union Pacific (NYSE:UNP) is a massive railroad company that also happens to operate a great low cost purchase plan at Computershare as well. Their fee schedule mirrors that of Exxon, and you also happen to get to invest in one of the better transportation firms in North America.
5. Phillips 66 (NYSE:PSX) is the refining and midstream firm that was spun off from ConocoPhillips a few years ago. This is another firm I have opened a DRIP in the last few months, and the no fee structure plus low PE ratio make this an incredibly attractive plan to invest into.
These are just a few of the options available to invest in at Computershare with no fees, but also are the highest quality ones. Johnson and Johnson (NYSE:JNJ), Dr. Pepper Snapple (NYSE:DPS-OLD), and Emerson Electric (NYSE:EMR) also offer low cost purchase plans; JNJ & DPS have no purchase fees but an account setup fee, and EMR has no setup fee but charges $1.00 for each ongoing purchase. These firms also have caveats, as they minimum investment amounts, but those can be easily met by most investments.
Options outside of Computershare
Loyal3 also offers a wide range of stocks you can purchase with no trading commissions or account opening fee. The plans are paid for by the company, and utilize batch trading like Computershare. The selection is mostly limited to consumer companies, and as such, many firms are also overvalued. High yield options are also lacking.
Wells Fargo Shareowner Services also offers a wide range of plans. Among these, the best are the spice firm McCormick (NYSE:MKC) and the monthly dividend triple net lease REIT Realty Income (NYSE:O). MKC charges a $15.00 account open fee and no subsequent fees until you sell; O charges a $5.00 account open fee and no subsequent fees until you sell. Both have minimum purchase requirements, but this can be satisfied by setting up monthly purchases for a few months. Since the goal for plans such as this is to invest money monthly for long periods of time, this is a relatively easy burden to overcome.
The loss of the fee-free plan of P&G at Computershare was a blow, but there are other options that always exist. With a little digging, attractive firms are out there waiting to be invested in.
Disclosure: I am/we are long DPS, EMR, JNJ, UNP, XOM, PSX, PG. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.