Dividend Reinvestment Plans (DRIP) is an easy way to give the shareholders a great way to reinvest the dividends automatically buying additional shares of the companies stock. These DRIP accounts are a convenient and inexpensive way to accumulate wealth over time. Basically, A DRIP is when the company pays you its quarterly dividend; the dividend amount is exchanged into additional shares every quarter for the convenience of the Drip members like yourself.

These plans are easy to join. Simply call the company usually the investors relations division and have them send you the forms for the DRIP program, fill them out and send them back. You can also look up the companies on their website. Go to the investor’s part of the site. There is a lot of information there for your convenience.

Once you are in the plan, the number of shares you hold will accumulate with each passing dividend date. Thus, no expensive brokerage fees, usually a small percentage of the shares bought for the quarter. Some companies offer to the public the initial stock purchase, sometimes called a DSP (Direct Stock Purchase); otherwise you have to use a broker to buy your first few shares. Look around and do not forget to ask.

Through the plan, extra cash deposits can be sent in to acquire more shares. Make sure to find out the dates that the company reinvests. Sometimes it is weekly or at least monthly. This is very important. Send in your money, usually a check, to the company several days before the deadline, not several weeks. Find out the quarterly date that the company declares dividends. Ideally, send in a check to buy shares right before the dividend date is the secret to get the best market timing. It is called buying a dividend as long as these shares are "on record" before the company declares the dividend.

Keep track of these dates. Companies declare dividends on a quarterly basis. Every three months and four times a year. Quarterly cycles are different depending upon the company. For instance, the baby Bells reinvest at the first of the month of February, May, August and November, (2,5,8,11). Other companies, have a (3,6,9,12) cycle and there is a (1,4,7,10) cycle also. This may not mean much right now, but is very important when you need the income later in life. Ideally you can get a check every month given the arrangement of your portfolio. This is why you need to estimate your monthly needs for mainly retirement and organize accordingly. These cycles are also important when buying dividends. Each month send in your money to enhance that particular cycle.

Cash optional payments as they are called, depending upon the company, offer different minimum amounts. Many are 25 dollars, but the amount does vary. Keep track of your companies and the amounts. When you have a few dollars, the share price looks about right, buy some more to add to your plan. Do not be so concerned with buying whole shares because the company will purchase fractional shares. It all adds up in the long run. Do send in as much as you can and use the dates, cycles and or the stock price to maximize your money.

Every quarter you will receive a Statement of Account from the company. It is very important to keep these. Be smart and put them in a folder and keep them all together. Also, buy yourself a hardbound memo book for keeping records.

The company does many of these Drip’s. Sometimes a Transfer agent, normally a bank or trust will handle these accounts. Just be sure to look through your mail carefully, these envelopes are easy to overlook from the junk mail.

There are some Drip’s that can be enrolled in by bypassing the broker and actually buying the first share from the company. Utility companies are known for this and available to their utility customers. Ask about their no load buying direct program. Normally a minimum amount is required and some type of an initial set up fee. This is definitely cheaper than a broker. Look around, it will save you money.

Upon obtaining 100 shares, often considered a block of shares by a broker. Have the company issue a certificate for the shares. This way you have a better control over shares if you need to liquidate them with a broker. Selling the stock with a broker will cost you because of the fees, but you will have better control over the price. Keep the certificates in your safe deposit box.

When a company buys or sells Drip stock, an average for the days purchases are taken and this is the price. Depending what the market is doing can influence the price, thus making it unpredictable to a certain point. The price normally goes up during this time. Weigh out the cost of a broker versus the amount of shares and price and how much of a variance will effect your decision. Time is a critical issue here. Do you really want to take a few hours to worry and make the trade manually? It is sometimes better to do it internally and not worry about it. Consider all options.