Brokers That Offer DRIPs - Dividend Reinvestment Plans


Discount online stock broker companies offering DRIP, no cost dividend reinvestment plans on stocks, ETF, mutual funds, ADR: TD Ameritrade, Motif Investing, Etrade, Fidelity Investments, Ally, Vanguard, Charles Schwab, Wells Fargo, IB, Merrill Edge, USAA, Firstrade and Tradestation



Discount Brokers DRIP Plans List


Brokerage DRIP Plan Fractional Shares DRIP Program Details
Ally InvestYesYesAll marginable U.S equities and selected American Depository Receipts (ADR's) priced at $4 or more that trade either on an exchange or quotes on NASDAQ are eligible for DRIP. Learn more
TD AmeritradeYesYes All securities that pay dividends can be eligible, and that includes ETFs, ADRs, and even mutual funds. Clients can either enroll individual security or enroll in DRIP their whole account. Learn more
Charles SchwabYesYesContact Schwab for specific securities eligible for DRIP investment. Learn more
EtradeYesYes Mojority of stocks that are currently trading above $5 per share are eligible. ADRs and ETFs, unfortunately, are not eligible. Learn more
FidelityYesYesApproximately 6,000 securities eligible. Mutual fund dividends default is to reinvest. Stock dividends default to pay into your cash core. Learn more
FirstradeYesYes All U.S. equities that are marginable and are currently priced above $4 per share as well as selected foreign securities are eligible. Client's account can be set up for DRIP on the day the security is purchased.
Interactive BrokersYesYesOnly U.S.-listed common and preferred stocks paying cash dividends are eligible for reinvestment
M1 FinanceYesYesWhen any security you own pays you a dividend, it will be deposited into your account. If a dividend payment causes your cash balance to exceed your cash control threshold, your cash balance will be automatically invested in your portfolio based on your target allocations.
Merrill EdgeYesYesLearn more
Motif InvestingYesNoWith Motif's auto-reinvest, all cash dividends will accumulate as dividend balance that will be used to purchase shares of any stock or ETF of your choice
RobinhoodNoNoDRIPs not offered
SogotradeYesYesEligible: any Listed or NASDAQ stock and ETF. To enroll, go to SogoTrade website, select the Trade tab and then the Dividend Reinvestment Plan item to configure your DRIP settings
TIAAYesYesLearn more
TradestationNoNoDRIPs not offered
VanguardYesYesLearn more
WellstradeYesYesLearn more


DRIP Brokerage Firms


A Dividend Reinvestment Program (DRIP) is a convenient way to help your investments grow through systematic purchases. A DRIP lets you take the money you receive when a company pays a dividend and immediately purchase additional shares of that company's stock without having to place an order, pay a commission, or purchase a round number of shares.

Table above contains online stock brokers offering DRIP plans in 2018. Some companies offer only stock or mutual fund DRIPs, others allow DRIPs for ETFs and ADRs too.


How Do DRIPs Work?


Let's say you’d like to invest in a big, safe, blue-chip company that pays good dividends and that’s going to be around 100 years from now. After researching several possibilities, you choose XYZ Corporation. However, XYZ is trading at $50 a share. At that price, you can afford to buy a grand total of one share.

Here’s where a dividend reinvestment plan really comes in handy. Let’s say, for example, that you call XYZ Corporation directly and tell them you want to enroll in their dividend reinvestment plan. You buy one share of XYZ from the company and register it in your name to become a shareholder of record. You fill out a DRIP application, read the company prospectus, and you’re enrolled in the XYZ DRIP.

At the end of the next financial quarter, you receive a statement. It informs you that your one share of XYZ stock has earned a dividend of $1, which was automatically reinvested. You now own one share of XYZ, plus a fractional amount of a second share. You weren’t charged anything for this fractional purchase.

This process repeats itself every quarter. Your XYZ dividends are reinvested in new, fractional purchases. Over time, they start to add up to whole numbers. Soon you own two shares of XYZ, and three, and four, and five. This process is called compounding, and it’s amazing how it adds up.

However, if you want to speed things up, you can also invest fresh money in the DRIP through an Optional Cash Purchase Plan. Plans vary by company: you check and see that XYZ doesn’t charge you any fee to make an additional cash purchase of stock, and that you can invest as little as $15.

Say three months later you get a raise at work and you’re able to go a bit further. You arrange to have $25 a month automatically transferred to your DRIP. You’re now buying $25 worth of XYZ a month -- even though XYZ is selling for $50 -- and since you’re buying direct from the company, you aren’t being charged stock commissions.

What’s more, you’re now dollar-cost averaging. Dollar-cost averaging just means that because you’re buying stock every single month, you don’t have to worry about whether the price of XYZ was high or low at the time. You’re buying every month, both when it’s high and when it’s low, so in the end, the price averages out for you.

Some companies even allow DRIP investors to buy additional stock at less than the market price!

So far, a rosy picture. But are there any drawbacks to owning DRIPs? Some people complain that DRIPs can be inconvenient come tax time. When you sell your shares, you have to report the cost basis when calculating capital gains tax, and that’s a pain. Then too, a company you want to buy from might not offer a DRIP. If they do, the fees for setting one up may be high, or a minimum purchase amount may be required. Stock gurus also advise investors to diversify their DRIP holdings over several companies and market sectors to minimize risk. If you take their advice, it will be inconvenient to sign up for, and keep track of, six or seven separate DRIP programs through seven different companies.

Be aware that DRIP arrangements also vary based on the company. Some companies don’t want to manage DRIPs in-house and farm that work out to transfer agents, such as banks. In that case you would have to apply to the bank to enroll, though in many cases you may do this online. You may also purchase DRIPs through brokerage firms, and since brokerages keep good account records that are useful at tax time, some DRIP owners prefer the convenience of purchasing them this way. However, keep in mind that while brokerages may allow you to reinvest your dividends, they won’t allow you to purchase additional stock through an Optional Cash Purchase.

To recap: if you have more time than money, and want to start a retirement fund, a dividend reinvestment plan can be a good way to build a nest egg. Just be sure to diversify, and keep track of your activity. And if you want to make additional stock purchases as well as just reinvest dividends, buy directly from the company, or from its transfer agent, since brokerages do not offer this option.