Ask the Dollar Diva By Dorothy Rosen • Bankrate.com

Not all DRIPs mean trouble

Dear Dollar Diva,
What is a DRIP?

DRIP is an acronym for dividend reinvestment plan or direct reinvestment plan. DRIPS allow regular people to use dividends or cash to purchase shares of stock directly from the company that issued them.

Hundreds of solid companies offer DRIPS, including Anheuser-Busch Companies Inc., Coca-Cola, General Electric Co., Lucent Technologies Inc., Pfizer Inc., Walt Disney Co., Xerox Corp. and Zions Bancorporation.

Depending on the company, plan participants can invest from $10 to $10,000 each month to make direct stock purchases, often without having to pay any fees or commissions. DRIPS are manna for the small investor with limited investment capital, who wants to be in the market but can't afford the transaction fees charged by brokerage houses. In many cases, once that investor owns one share of stock registered in his name, he can invest in that company whenever he's got a little extra cash -- and none of his money is wasted on commissions.

These plans are buy-and-hold vehicles for long-term investors. The company doesn't buy your shares the minute it receives your money, nor does it sell your shares the minute you tell it to. It has scheduled times for trading, and the process is slow.

There are several things to look for when investigating DRIPS:

• Enrollment requirement -- initial minimum cash or stock requirements

• Plan Details -- minimum future purchase amounts

• Any fees -- enrollment, cash purchases, commissions

Netstock Direct is a good online source for identifying and researching the companies that sponsor DRIPS, and to get a plan prospectus and application form.

DOROTHY ROSEN has a master's degree in finance, with a specialization in accounting, from the Kellogg Graduate School at Northwestern University in Evanston, Ill. Rosen has more than 15 years of experience in the financial arena, serving in Illinois and Florida as a certified public accountant, financial consultant, expert witness and educator. She is owner of Dorothy Rosen, CPA, a public accounting firm that serves individuals and small businesses.