Revolt Against Fees!

against feesLast week I received bad news about a dividend reinvestment plan (DRIP) that I’ve invested in for the past two-plus years. Procter & Gamble (PG), the consumer products giant and popular Dividend Aristocrat, switched its stock transfer agent and raised fees.

DRIP fees are the enemy of dividend growth investors. Those of us that track every penny we receive hate our pennies being salami-sliced out of our possession.

That’s what Procter & Gamble DRIP shareholders are dealing with now. The company left long-time transfer agent Computershare, in favor of Wells Fargo Shareowner Services (WFSS).

Procter & Gamble is using the opportunity to shift some of the cost burden to DRIP shareholders in the guise of a “best in class online experience”.

In a recent article, I wrote about my general move away from DRIP investing. Once a good way for investors to put money toward a stock by dollar cost averaging and reinvesting dividends, DRIP investing has become a bit of a dinosaur.

DRIP fee structures vary dramatically from company to company. The big transfer agents haven’t invested much in technology, so investing online still feels like it’s 2002.

Claiming a better “online experience” is a farce.

Many traditional online brokers, including TD Ameritrade and TradeKing, offer dividend reinvestment for free. So the need for DRIP programs is questionable anymore.

Initiated in April of 2014, my Procter & Gamble DRIP position has grown to 39 shares worth more than $3,000. I already planned to transfer my shares to TD Ameritrade but haven’t gotten around to it yet.

Now it’s a priority. I don’t need the aggravation of another online account or the fees. So first chance I get, I’m transferring my shares to TD Ameritrade, just like I did with 194 Verizon (VZ) shares and will do with other stocks in the near future.

This move by Procter & Gamble is a step back from a historically shareholder friendly company.

The most annoying part of the new Procter & Gamble DRIP plan is that management is trying to portray it as moving to a better platform, claiming Wells Fargo Shareowner Services has ranked slightly better than Computershare by some “independent tracking surveys”. As if that matters.

The only thing that matters with DRIP investing is fees.

So I decided to call management out and wrote an article on Seeking Alpha to expose the decision and to make sure investors understand the fees. The article is called Dump The Procter & Gamble DRIP.

Judging by the comments section, many Seeking Alpha readers share my distaste for fees and are revolting, moving shares out of their accounts. Others question DRIP investing altogether.

To help illustrate why a very low-fee DRIP can be an effective way to accumulate shares, I linked to my Procter & Gamble DRIP tracking spreadsheet in the article.

The sheet shows penny for penny how I accumulated 39 shares of stock and paid just $0.88 in fees over two years.

That kind of low-fee DRIP accumulation is impossible with the new transfer agent fees.

Please head over to Seeking Alpha to read the article. My hope is that it reaches as many investors as possible, as well as the Procter & Gamble Board of Directors and the management of other companies considering something similar. As of Tuesday night, the article reached 10,000 page views.

The trend in investing is lower fees, not more fees. Procter & Gamble got this one wrong.

Click the button below to check it out:

Read Dump The Procter & Gamble DRIP

Disclosure: The author is long PG and VZ

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12 Responses to Revolt Against Fees!

  1. FerdiS June 22, 2016 at 7:23 am #

    I don’t like DRIPping because of the relatively small number of shares I own — adding just a couple of shares at a time just doesn’t make sense to me. In contrast, Scottrade features a FRIP (F for flexible) in which you can accumulate dividends into a cash reserve until you decide to buy stocks. You can choose how often this happens and specifically which stocks you want to buy. I do it quarterly and buy shares of a closed-end fund yielding 8% or so.

    As a DGI blogger, I want to track every detail and DRIP transactions would just drive me nuts. Principally, I like the idea of reinvesting without commissions, I just don’t support the idea of automatically buying more shares of the same company. There used to be discounts for DRIPping, but I’m not sure that exists anymore.

    • Retire Before Dad June 22, 2016 at 7:33 am #

      Ferdis,
      Thanks for chiming in. The TAs track all the small transactions and cost basis. So investors don’t have to anymore. I choose to keep up a spreadsheet too. Although I have less time for that now and it’s partly why I’m transferring out.

      I’ve heard many good things about the FRIP at Scottrade. My dividends are big enough to just poll now.

      But for investors just starting out, the DRIPs aren’t the best option any more. Plenty of alternatives.
      -RBD

  2. Kate @ Cashville Skyline June 22, 2016 at 8:02 am #

    Ouch, RBD. I don’t blame you for being upset about Proctor & Gamble’s decision! I’m heading over to Seeking Alpha to read more now 🙂

    • Retire Before Dad June 22, 2016 at 8:30 am #

      Hi Kate,
      I already decided to get out of the DRIP. But I’ve dragged my feet on actually moving the funds out. So I’m not that mad. Thought it was right to expose the fees. This is a kick in the gut to long-time shareholders. Seems like employees and retirees may have different terms though. My great uncle worked for the company since the 1960’s and retired with thousands of shares. Pushing new fees on him would have really T’d people off!
      -RBD

  3. Route To Retire June 22, 2016 at 9:26 am #

    Thanks for the post on this – I do all my dividend stocks through TD Ameritrade. I’m just now focusing more on dividend reinvestments and fees are something I didn’t really think too much about.

    I actually moved a couple of straggler DRIPs I had with the companies over to to Ameritrade so I’ll have to see how the reinvestments are being handled (I like the free method through Ameritrade you mentioned better!)

    — Jim

    • Retire Before Dad June 22, 2016 at 9:57 am #

      RTR,
      Been a big fan of TDA for many years. Though I’ve never reinvested dividends. I pool my divs and selectively invest in whatever stock is temping at the time of buy. Thought I’d mention reinvestment in regular brokers as an alternative.
      -RBD

  4. JTF June 22, 2016 at 9:30 am #

    I’ve invested in PG’s own SIP before they transferred over to Computershare. It used to completely fee-free, but since they moved to Computershare, they implemented a $0.02 trading fee per share for both DRIP and optional or recurring purchases. They said the fees were put in to “remain competitive with peers who charge similar fees”. I then stopped my monthly recurring investment, but continued the DRIP, since I was only paying $0.02 each quarter. Now that they are transferred again to Wells Fargo, with even higher fees in place, I think I will have no choice but to stop the DRIP also and just receive cash. PG’s gradual progression from being a small investor-friendly company to a decidedly unfriendly one is such a disgrace.

    On the other hand, WTR, YORW, NNN, and HCN all not only charge no fees, but also offer discounts! They are the rare ones nowadays, unfortunately. There used to be a lot of DRIP plans that offer discounts, but have now disappeared. Fortunately, there are still plenty of other great companies that charge no fees. Loyal3 is a great no-fee broker I use as well, which can dollar cost average like a DSPP.

    • Retire Before Dad June 22, 2016 at 9:55 am #

      JTF,
      Similar boat here. I do own WRR still in the DRIP and get that discount. It’s probably the only DRIP I’ll keep. I’m also still using Loyal3 to DCA, however more selectively.
      -RBD

  5. Dividend Growth Investor June 22, 2016 at 9:46 am #

    I totally understand your frustration with P&G’s DRIP plan. One of the few things we can control as investors however is the cost of investing. Moving the stock over to a low cost broker would likely be the best solution.

    On the other hand, I have found that when I drip the same stock accross different brokers, I always get widely different reinvestment prices. Which is one of the reasons why I accumulate dividends in cash, and then combine it with new money to buy a stock. I call it selective dividend reinvestment.

  6. themoneysprout October 11, 2016 at 7:41 am #

    Completely agree here! I didn’t even pay attention until recently how much DRIP fee’s I was paying to reinvest my VZ dividends through Computershare. I am planning to transfer my shares asap!

    • Retire Before Dad October 11, 2016 at 10:03 am #

      Sprout,
      I transferred my Verizon shares to TD Ameritrade a while back. The PG transfer is complete now too. Fees are a real drag on those DRIPs. And they can sneak up on you. I tried to raise the red flag with PG since they tried to mask the change as switching to a better transfer agent.
      -RBD

  7. Ryan November 16, 2016 at 12:26 pm #

    Ugh, I actually just realized this when I got my quarterly statement and saw the fees. Wells Fargo, it figures. I am going to withdraw this and put the money towards finishing up maxing out my Roth IRA. It’s also probably better to buy it from a brokerage that offers free dividend re-investments. A total bummer.

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