Monday, February 04, 2008

ZERO / LOW COST METHOD FOR LONG TERM INVESTING IN 5 STAR RATED COMPANIES

Read this if you are interested in establishing no/low cost long term investments via DRIPS.

I own 23 DRIPS and strongly believe in using them as a component of a diversified portfolio. I like DRIPS because of their low cost method of investing. I also find them useful in that they force you to buy and hold (not as liquid as stocks in regular brokerage account).

There are several useful sites for DRIP investors. They are:
(1.) Moneypaper INC's DIRECTinvesting.com
(2.) Computershare
(3.) Bank of New York-Mellon
(4.) Mellon Bank (in process of merging w/ "3" above)
(5.) Wells Fargo

The Moneypaper is a great starting point to find out what holding company carries the DRIP you are interested in. Then, you can either go to their website and buy, or purchase through the Moneypaper if the holding company does not allow direct initial purchase.

The title alludes to 5 star rated companies. I did a search on my Morningstar account for 5 star rated (highest Morningstar rating) DRIPS then compared it against the Moneypaper's no/low cost list. Morningstar's ratings are dynamic and change periodically when staff updates a stock's analysis. When I say no/low cost, I mean zero or negligible fees for dividend reinvestment, auto-purchase or cash purchase. Here's the result:

Finance
Bank of America
Capital One
Cathay General Bancorp
Comerica Inc
Regions Financial
Morgan Stanley
Synovus Financial
Wachovia
Wilmington Trust

REIT
Brandywine Realty Trust
CapitalSource Inc
Corporate Office Properties

DRUGS
Johnson & Johnson
Mylan Laboratories
Schering-Plough
Valeant Pharmaceuticals

Natural Resources
Alumina
Marathon Oil
Southern Union

Discretionary
Anheuser-Busch
Brown-Forman
General Mills
Kellogg Company
Limited Brands
Wal-Mart

Other
3M
Boeing
Consolidated Edison
Graco
ITT Corp
Masco
McGraw-Hill
Paychex

Of the companies listed, I own McGraw Hill, 3M, Graco, Wal-Mart, Limited Brands, Anheuser-Busch, Johnson & Johnson & Bank of America via DRIPS. I've been eyeing Boeing. I own Alcoa, Baker Hughes and Exxon DRIPS for exposure to Natural resources, but would also consider Apache. I own the Southern Company DRIP for exposure to utilities. In lieu of some of the industrials above, I own the Manitowac, Pentair and Cummins DRIPS. I've been avoiding the food stocks and have instead gone long Agriculture via ADM and JJG (ADM and JJG not via DRIPS).

Aside: My employer provides us with a free subscription to Morningstar. If you don't already have access, you can frequently find Value-line and Morningstar at your local library.

4 comments:

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Roman said...

DRIPS are the best! Set them and forget them! I know its kinda lame but its true. Why don't you have more commodities ? Those are the ones i focus on.

Finance Junkie said...

Roman,

I didn't include more commodity drips b/c I couldn't find any good ones without significant fees. It's far easier to buy into commodities via a regular brokerage account. I tend towards to the GLD (gold) and JJG (soft commodity) ETFs. Finally, I've held relatively larger positions in BHP Billiton and Rio Tinto in the past.

Anonymous said...

seems like an awful high number of drip accounts... even lt b+h strategy and diversification it seems that you wouldn't get nearly the rate of return expected if you were to only drip invest in a fewer set of funds with more of the money.