This is the third installment of my series on DRiP investing.
Enrolling Into the Plan
Now that you have the shares registered directly to your name, you can enroll into the DRiP and SPP of the company. This is done by simply filling in a DRiP Authorization Form, issued by the company, and returning it to the transfer agent. Sometimes, you will receive this form automatically when you become the direct owner of the shares. You can also call the transfer agent of the company and ask for the form to be sent to you.
Some of the plans offer a number of different options. You will want the option that allows you to automatically reinvest your dividends into more shares of the company, and that allows you to make additional purchases (i.e. participate in the share purchase plan).
Making Additional Purchases
If the company offers a SPP, you will then be allowed to make additional purchases. This is done by simply sending a cheque to the transfer agent, along with the Optional Cash Purchase form. When the next purchase date is reached, your money will be used to purchase additional shares of the company.
Those purchases are done at specific, pre-determined dates, as specified in the plan brochure. This is usually at the payment date of the next dividend, but some companies allow you to invest monthly. When the transfer agent receives your cheque, they may cash it in immediately, but they will wait until the next purchase date before investing it.
The price of the shares is usually determined by the average of all shares bought during a specified period before the purchase date (5 days is common, although I have seen longer periods).