Chuck Carlson is the newsletter industry leader in DRIPs, or dividend reinvestment plans. Not surprisingly, then, his newsletter is called The DRIP Investor.
For those unfamiliar with these programs, DRIPs are dividend reinvestment plans, which are set up by companies to make it easier and more cost-effective for individual investors to buy and accumulate long-term positions by reinvesting dividends back into additional shares.
Usually, the commissions and other related costs of DRIPs are low, and in some cases, free. Says Carlson, "All things equal, a DRIP with no fees is better than one that charges fees."
He continues, "To be sure, I'm not suggesting investors should automatically discard a DRIP because it charges fees. Still, fees erode investment returns, so taking fees into account in your selection process makes sense."
To help investors find the most cost-effective way of building portfolios, the advisor has conducted a review of "fee-free" plans. Using a proprietary system that ranks 5,000 stocks based on over 100 metrics, he has developed a "starter portfolio" for those with limited investment funds. Such a starter portfolio, he notes, could be developed with as little as $1,000 to start.
He notes, "If I were constructing a reasonably diversified starter portfolio of six "fee-free" stocks, I would focus on the following issues:
Bank of America (NYSE: BAC) - This leading bank offers a great combination of yield (more than 4%) and reasonable appreciation potential. Minimum initial investment is $1,000. Subsequent investments are a minimum $50. Another excellent option in the banking sector is Regions Financial (NYSE: RF), which also has a $1,000 initial minimum.
Becton Dickinson (NYSE: BDX) - This health-care concern markets medical supplies, devices, laboratory equipment, and diagnostic products worldwide. Minimum initial investment is $250.
Emerson (NYSE: EMR) - This company manufactures electric equipment and electronics. Dividends have increased annually for 50 years. Minimum initial investment is $250.
ExxonMobil (NYSE: XOM) - Every starter portfolio should include an energy stock, and it's tough to beat ExxonMobil for consistency and long-term performance. Minimum initial investment is $250.
Lockheed Martin (NYSE: LMT) - Defense stocks are scoring particularly well in our stock rating system. Lockheed Martin represents the best choice in the group. Minimum initial investment is $250.
PepsiCo ( NYSE: PEP) - I own PepsiCo and regard it as a core holding for any portfolio. Minimum initial investment is $250. If you are looking for an even more affordable play in the consumer-products sector, Kellogg ($50; NYSE: K) has a minimum initial investment of just $50."
Chuck Carlson points out that while all of the companies above offer plans that are considered "fee-free," he notes, "In some instances, an investor may pay an enrollment fee to join some of these plans." Outside that, however, these companies do not charge any fees for optional cash investments or reinvestment of dividends.
For more stock picks from the leading financial newsletter advisors, visit Steven Halpern's free daily website, TheStockAdvisors.com.
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Reader Comments (Page 1 of 1)
4-30-2007 @ 8:05AM
Frank H. Armani said...
For young people Drips were a great way to set up a great long term investment portfollio.
4-30-2007 @ 11:57AM
Evan Thomas said...
What's stock or option is showing a up trend right know!!!!!I just need one or two to look at. Thank You!!!!!
4-30-2007 @ 1:24PM
flintlock said...
iotn--up $1.27 today
5-02-2007 @ 11:27AM
bill said...
joj