| Topic - All About Bank-Sponsored DRIPs | Education Center |
While many companies sponsor and administer their own DRIP and DSP plans, some companies choose to not be involved in the operation of their plans at all. These companies contract with a bank who is the sponsor of the bank. In the case of bank-sponsored D RIPs and DSPs, the stock is purchased with reinvested dividends and through optional cash purchases comes from the open market, and not from treasury or original issue stock such as might be the case in a company-sponsored plan.
Netstock Direct lists 309 bank-sponsored DSP plans. The vast majority of these are foreign companies whose shares trade on a U.S. market as ADRs. These companies can't sponsor their own DRIPs, so the bank who sponsors the ADRs also sponsors the DSP plan. < p> But other companies, such as Aetna and Caterpillar, also don't offer their own plans, instead relying on a bank sponsor.
The fees charged by bank sponsored plans tend to be slightly higher, typically in line with the fees charged by direct purchase plans when compared to standard DRIPs.
In the end, it doesn't make a lot of difference if a DRIP or DSP is sponsored by a company or by a bank. The bottom line is whether you believe the company will be a good long-term purchase for your portfolio, and if the fees are manageable.