DRIP's

Dividend Reinvestment Plans, DRIP's, are a very conservative, yet effective method to obtain double digit-long term growth.

Seldom will you hear about this powerful investment strategy from a broker. The start up fees are low and the recurring stock purchases can also be executed inexpensively.

Their is no financial incentive for a broker to inform their clients about these plans. They receive much higher commissions from their stock and mutual fund sales.

These plans reinvest your dividends into purchasing more shares of stock. It automatically institutes dollar cost averaging as it purchases more shares when the stock price is lower, and less shares when the price is higher.

Another attractive feature is, you don't need a lot of money to get started. Many companies will allow you to open an account with as little as one share. Once you have purchased the required amount of shares, you may have your dividends reinvested continuously at no additional cost.

There are also many companies that offer the opportunity to purchase shares at a discount to current market price. This offers an immediate return on your investment. However, the discount will depend upon the company you are purchasing from.

I have personally owned a DRIP Plan for over 20 years.

Just imagine a snowball rolling down a hill. As it rolls, it picks up more snow and grows larger. DRIP's work much in the same way. As your dividends are reinvested, they purchase more shares, which pay you more dividends. The longer you contribute and invest in these plans, the higher your annual rate of return will be.

The reinvested dividends received are taxable. Since money was paid to the stock owner, it is viewed as income. It is best to keep very accurate records for Tax purposes, as it is advisable to let a Certified Accountant do your DRIP Tax work.

Most company DRIP's are handled by just a few Investor Companies. Share Owner Online, American Stock Transfer and Trust Company, Computer Share, Bank of New York Investor Service and Share Builder are some of the Investor Companies that administer DRIP's.

There are hundreds of companies that offer DRIP's. Isolate a few that you are comfortable with on a long-term basis, and establish a consistent investment strategy.

A long-term investor should absolutely take advantage of the DRIP opportunity. The potential for double-digit annual growth is realistic.

Don't expect a broker or financial advisor who makes their living off of commissions to inform you of this strategy. Most investors who utilize these plans discover them through their own research, or they are lucky enough that a friend or family member informs them.

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10 DRIP Companies to Consider

US Bancorp (USB)

This strong financial institution has paid a dividend for 145 years consecutively. Just as impressive, they have raised it every year for the past 36 years.

The management has been historically conservative, and this will apparently continue. The current subprime crisis is a very good example of how well this company is managed. Most Bank Stocks have plummeted in the past 6 months. US Bancorp has fallen only a small percentage compared to its competition.

The track record of this Bank is strong. It is an excellent choice for a DRIP Plan.

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McDonald's (MCD)

Most people have seen the documentary where the guy eats McDonalds fast food for 30 days straight. Of course this is not healthy. But I still to this day think they exaggerated the extent of the effects.

McDonalds has over 30,000 restaurants in 119 countries. People all around the world know what McDonalds is. It is a symbol of American culture.

This is a no brainer. People are going to continue to eat at McDonalds. Its share price shall fluctuate like every other Blue Chip stock. However, if you have a long-term investment strategy, the process of dollar cost averaging will make your returns fantastic.

This solid company is going to be around for a long time to come.

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Kinder Morgan (KMP)

The Products Pipelines segment delivers gasoline, diesel/fuel, jet fuel, and natural gas liquids to various markets through approximately 10,000 miles of products pipelines and 60 associated product terminals.

The Natural Gas Pipelines segment gathers, transports, stores, treats, processes and sells natural gas through approximately 14,000 miles of natural gas transmission pipelines and gathering lines.

It is a large Blue Chip company with a market cap of over $13 Billion.

Currently it has a generous dividend payout.

The company has plans for expansion, and will probably begin doing so in the near future.

This is an excellent candidate for a DRIP Fund.

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Walmart (WMT)

Is there any question that Walmart will be around for a long time?

Outside of the US Government, Walmart is the biggest employeer in the country.

It has thousands of retail stores located all over the world. It would be easier to name the countries that don't have Walmart, than to name the countries that do.

This is a definite candidate for any DRIP fund.

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General Electric (GE)

They are one of the most diversified industrial corporations in the world. I don't have the space to list all of their products.

This well known company was started in 1892 in Fairfield, Connecticut.

It is a Blue Chip amongst Blue Chips.

Analysts estimate a 5-year growth rate of over 11%.

It currently pays a solid dividend.

This is a company you will always be able to depend on.

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Anheuser Bush (BUD)

Alcohol related stocks have a strong reputation of being steady performers regardless of what the economy is doing.

Whether you agree with it or not, many people love to have a cold beer every single day.

This is why this very solid beer producer should be considered for your DRIP Plan. It is as close to recession proof as any company you will find.

It has a narrow 52 Week Trading Range, and a solid 2.70% current dividend yield.

What's not to like?

Coca Cola (KO)

Our modern day society has just as much of a sugar addiction as it does alcohol. A strong case could be made that the sugar addiction is on a larger level.

Although I do not feel this industry is as recession proof as the alcohol industry, it is close.

Coca Cola has a relatively narrow 52 Week Trading Range, and a decent 2.30% dividend yield.

It is a company you can depend on for many years to come.

Exxon Mobile (XOM)

Some analysts say this is due to Peak Oil and others say it is because all of the easy accessible oil has been obtained.

Whatever the reason, the Big Oil Companies have been making profits at record levels. It will be many years before alternative energy sources have any major impact on our consumption.

The Big Oil companies will be around for many years to come. Whether anyone likes it or not.

Johnson & Johnson (JNJ)

It has a very narrow 52 Week Trading Range and a solid 2.60% dividend yield.

It also can be considered less volatile in a weak economy.

The name Johnson and Johnson is recognized all around the globe.

Peabody Energy (BTU)

I know the environmentalist hate coal.

It is also true that continued use of this energy source will discourage research into alternative energy sources.

However, coal is very inexpensive to produce in comparison to other energy forms, and there is such a great abundance of it here in this country.

The dividend is low and the 52 Week Trading Range is wider than I would generally accept, however, all indicators point to coal consumption rising much higher in the future.

The value here is the stability of the overall company and the strong possibility of capital appreciation.

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