What is a direct stock purchase plan (DSPP)?

A direct stock purchase plan (DSPP) allows investors to purchase shares directly from the company. DSPPs require very little money to get started. Some DSPPs have no fees, but most have small fees. These programs present long-term investors with a simple and automatic way to acquire shares over time.

What is a DSPP & how does it work?

A DSPP allows individual investors to establish an account in which to make deposits for the purpose of purchasing shares directly from a given company. The investor makes a monthly deposit (usually by ACH) and the company applies that amount toward purchasing shares.

What is a dividend reinvestment plan (DSPP)?

DRIPs allow investors to reinvest their cash dividends into additional shares or fractional shares of the underlying stock on the dividend payment date. One drawback of a DSPP is that the shares are rather illiquid —it is difficult to re-sell one's shares without using a broker.

What are the disadvantages of a DSPP plan?

One drawback of a DSPP is that the shares are rather illiquid —it is difficult to re-sell one's shares without using a broker. As a result, these plans generally function best for investors with a long-term investment strategy.