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One Of The Easiest Ways To Build A Retirement Nest Egg
By: StreetAuthority   Thursday, February 16, 2012 10:53 AM
Symbols: BMY, FE, LMT, TEG
But if you buy and sell stocks in a large lump sum, without incurring much in brokerage fees, then your broker's DRIP gives you more control over the timing and price of your trades.

The decision of whose plan to use also greatly depends on the type of plan the company offers. Not all company DRIPs are the same, so you need to read the fine print in the prospectus (which you can get on the company's website or by phoning the company to request a copy). Some features in a company-sponsored DRIP and DSPP can make it worth your while to invest in a company plan even if you do invest in large lump sums.

For example, below is a summary of electric utility Integrys Energy's (NYSE: TEG) DRIP plan, which is one of the best I've found, compared with AT&T's (NYSE: T) DRIP. 

Besides share ownership, a lot of other features in a company DRIP and DSPP can make it worth your while to invest in a specific company plan -- or not. You can see, for example, how expensive AT&T's dividend reinvestment plan is compared with Integrys Energy's.

AT&T's plan is clearly inferior. Once you've made the initial share purchase, AT&T will charge you $10 to set up your account, plus a service fee of $0.05 per share. In addition, each dividend reinvestment will incur a service fee of 5% of the amount reinvested, up to a maximum of $2.00, plus a transaction fee of $0.10 per share.

In contrast, Integrys charges no set up fee, no service fees, and no transactions fees for reinvesting dividends in shares of the company.

You can sell the shares you've acquired in the AT&T plan, but you will be charged a sales service fee of $20 for an intra-day market order or $10 for a weekly batch order, plus a broker commission of $0.10 per share in either case. For Integrys, there's no sales fee and you'll only bear the cost of what a broker charges for selling the shares in the open market.

In sum, Integrys provides an attractive option to your broker's dividend reinvestment plan, but AT&T does not.

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