DRIP Investing, Step by Step

Buying a Share from a Friend

This is quite possibly the least expensive way to acquire a single share of stock in a DRIP company, but it does require a certain amount of paperwork. If an investor has a friend who owns stock in a DRIP, the two can arrange the sale/purchase of a single share. The seller could charge a nominal commission and the buyer would agree to pay additional transfer charges (if any).

Some companies make it easy by allowing the transfer of a single share into a new DRIP account with just a signed enrollment form. In other cases, the somewhat cumbersome share transfer process will have to be followed. A DRIP owner would notify the company's transfer agent to transfer a single share of stock to the buyer, using a "stock power," or by signing the back of the share certificate. In either instance, the owner's signature must be guaranteed by a participant in the Medallion program of the Securities Transfer Association, Inc.

While this sounds complicated, this Medallion Signature Guaranty can be obtained by signing the certificate or stock power in the presence of a guarantor at most banks. The signed stock power or certificate is sent to the transfer agent, with a letter of intent describing the transfer that is to occur. The entire process can take four to eight weeks before the buyer receives the certificate or statement from the DRIP administrator.

Most transfer agents and DRIP administrators can provide a stock power form that you can use. Often, these forms are published on their web sites.

[ next chapter ]
[ table of contents ]