Company direct purchase stock
We are quite familiar with the term stocks. It is used for shares as well as other financial instruments that are traded at the stock exchange. When a person buys the share of a company, he becomes the owner of the company, though partial. This ownership that is provided to a person by means of share holdings is limited to the number of shares held by him. Now the question comes how a person can get these shares so as to become the shareholder as well as the partial owner of the company. There are many companies that are listed at the stock exchange and the shares of such listed companies are feely tradable also. Thus, a person can easily buy these traded shares. These shares can easily be bought by means of various stockbrokers that provide such services.
In such cases, a person is required to pay the brokerage or the commission to these brokers in order to get the required shares of a company. Apart from buying shares that are traded on the floor of stock exchange, there is one more way in which a person can easily get the shares of any company. This is by way of Company Direct Purchase Stock. There are many companies that provide shares directly to the people under a specific type of plan called as the DSPP or the Direct Stock Purchase Plan. Though there is also a dividend reinvestment plan that allows a person to get the dividend announced by the company in the form of shares, the DSPP is considered as more favorable way to get the company shares. It is to be noted here that unless the company creates new shares, the company cannot increase the market capitalization and thus, it has to decrease the value of shares when it goes for increasing the number of shares. This is called as stock split and is resorted by many companies in order to increase the number of shares with the shareholder while keeping the market capitalization same. When a company offers the shares directly to the people by way of DSPP, there are of course certain benefits that are obtained by a person. Let us discuss these benefits next.
BENEFITS OBTAINED WHEN A COMPANY GOES FOR DSPP
There are many benefits that are provided. First of all, when a company provides its shares directly to the people, it allow a person to buy the shares directly and a person is not required to pay the brokerage or commission etc to any intermediate, as he is required to pay it when he buys the shares through the stock market brokers. Thus, a person is able to save a good amount by way of directly buying of shares. The second benefit that is provided by a company when it announces the DSPP is that a person can invest small amounts to build his portfolio. This is the reason why the DSPP plan is considered as best for those people who are not having sufficient money but wishes to make their own portfolio. It is also to be understood here that when the company books good profit and announces dividend, a person can easily get this dividend in the form of shares by means of dividend reinvestment plan. This allows him to increase the number of shares in his portfolio and since this trend is repeated every year, a good portfolio is built over the number of years. Thus, there are many great benefits that are provided by the company when it offers the Company Direct Purchase Stock by way of DSPP. Let us now discuss some of the aspects related to DSPP.
VARIOUS ASPECTS RELATED TO DSPPThere are many aspects related to DSPP that have to be understood. First of all, the trend of companies going for the Company Direct Purchase Stock has been observed in North American countries and France. It is not seen elsewhere. In North American countries like United States and Canada, the DSPP is resorted to by many companies in order to increase the number of shares in the market either by keeping the market capitalization same or increasing it too. The other aspect that needs to be understood here is that the company that goes for the Company Direct Purchase Stock requires a person to get enrolled first. If a person is not enrolled, he cannot get the shares under the DSPP. For getting enrolled, a person is required to get registered, which can easily be done by submitting a small registration fee, which is $10 in most of the cases. After getting registered and enrolled, a person can easily go for buying shares in future easily. It is to be understood here that unlike any brokerage house, this registration is company specific and thus, a person is required to get registered as well enrolled for each company, the shares of which he intends to buy. Apart from the registration fee, a person is required to make some initial deposit also with the company and in most of the cases, it is $500. The other amount that is payable when a person goes for buying the shares under Company Direct Purchase Stock is the transaction fee. This is the nominal fee that a person is required to pay with each transaction. Apart from the fee and amounts mentioned above, a person is not required to pay any other amount at all to get the shares under the DSPP. In almost all the cases, the company that wishes to go for the Company Direct Purchase Stock plan, appoints a transfer agent in order to complete the whole process. This transfer agent arranges for the DSPP and all the activities are carried out by this transfer agent only on the behalf of the company. The list of shareholders is maintained by this transfer agent only and in case of any discrepancy, this transfer agent is to be contacted. The name of transfer agent is generally provided in the advertisement related to Company Direct Purchase Stock.
SO, GO FOR COMPANY DIRECT PURCHASE STOCKSThere are of course many benefits of Company Direct Purchase Stock and thus, a person should go for these stocks when he comes to know about any company that offers DSPP. The financials and credentials of the company have to be assured so that there is no loss in future. There are also some related aspects that need to be understood.
Other Articles
