“One Share Millionaire” with the “U.S. Postal Secret”

By Travis Johnson, Stock Gumshoe, January 22, 2009

Quite a number of you, it appears, have seen this recent ad from Stansberry & Associates, trying to sell you a subscription to the 12% Letter by Tom Dyson. The teaser begins with the intriguing promise that there’s a “Postal secret” that will let you become a “1 share millionaire.” So what are these “compound shares” that you can buy?

“Whether stocks go up or down… some companies return tens of thousands of dollars a month starting with just a single share. But you can’t buy them on the market: They’re available through the U.S. mail.

“‘It’s almost impossible not to make money…
says the San Francisco Chronicle.”

(Sorry — I added the bold to that last quote. Couldn’t resist)

So what on earth is this? Some more info …

“In short – it’s a little-known way to buy ONE special and very powerful share of stock delivered through the U.S. Postal Service… no matter where you live. The power in these special shares lies in the fact that they multiply in number and in value, without you doing a single thing.”

This is probably starting to sound a bit familiar to those of you who’ve been washed up here on the shores of Gumshoe Island for any length of time … it is, of course, another (thinly, perhaps) veiled teaser for Dividend Reinvestment Plans.

I’ve written about these several times before, from this same newsletter and editor — they’ve been great ads, and they’ve clearly garnered a lot of attention, the first time I wrote about this was when Dyson was calling this kind of investing an “801k plan,” and I’ve had thousands of people ask me what on earth that could mean. Then the market tanked, and people began to be just plain angry about 401ks, so anything with a similar name had to be thrown out the window. Thus was born the “424 Dividend Boost” teaser ad, which essentially sold the same ideas.

And today, when it seems like we’re all in need of that “lottery ticket” that will help us build a fortune from the ashes of a burned-out market, the tease is that you can begin now to become a “one share millionaire.”

Of course, it might take you a few decades to get there … and maybe the patterns of history will not allow us to repeat the last 40 years of relative affluence and growing stock market returns to build these dividend-reinvested fortunes … but certainly this kind of scheme is still widely followed by those who buy individual stocks for the long run.

You can read my earlier articles on this if you’d like more commentary, but essentially a Dividend Reinvestment Plan (DRIP) is a way of building up your holdings in a single stock, sometimes with discounted pricing, over a long period of time. You buy the shares not through a broker but directly through a company and/or its transfer agent, and the account is held by them — the “postal secret” bit is that many of these transactions are done by mail, though often they can also be set up online. You can set it up so that you invest $25 or $250 or whatever each month in those shares, and the dividends are reinvested.

And hopefully, since you’ve chosen a once and future great company to start (unlike, of course, the companies that used to be great, like General Motors or Bank of America), your dividends will grow, the share base will grow, and eventually each dividend will be a massive multiple of the original investment you made in the company.

If you’re interested in this, here’s one example that’s hot today: Microsoft. They just announced some very disappointing news today (though most other companies in the country would probably gleefully trade press releases with them), and MSFT has over the last couple years, through dividend increases and a falling share price, slowly become a stock with a decent dividend yield if you buy it today.

So let’s say you want to enroll in MSFT’s DRIP program (I’m not telling you to, just providing an example). First, you visit the company’s web page, search around on their investor relations page, and find that they do have a direct purchase/dividend reinvestment program in which you can enroll. It’s handled by their transfer agent, American Stock Transfer & Trust. So you visit the transfer agent’s site and see what the terms of the program are — in this case, Microsoft requires a $250 initial purchase price, a minimum of $25 for subsequent purchases, and they will reinvest your dividends for free but they provide no discount on purchases or reinvestments. You can sign up online, and hopefully it grows nicely for generations.

Of course, if you want to build a portfolio of DRIP investments you’ll want to have probably at least a dozen or so companies that are all financially healthy and that cover a broad range of industries. One positive is that now seems a nice time to be picking up what used to be called “blue chip” companies, with many of them having massive cash hoards and strong current dividend yields. Some negatives, even if you accept the long-term dividend reinvestment premise as a good investment strategy, is that enrolling in a whole bunch of DRIP plans is a hassle, these holdings are often not terribly liquid (some require transactions by mail, many take at least several days for purchases and sales), and regular brokers have now gotten inexpensive enough (or free, in some cases) that you can easily set up your own portfolio and reinvest your own dividends without dealing with a bunch of transfer agents.

So is this a magic bullet? Of course not, it’s just another way of building wealth, based on the assumption that strong dividend paying companies will grow over time, and that they will slowly grow their dividends … and if you can hide those holdings away where it’s hard to sell them, and where you won’t be watching them every moment, they might have a chance, economy permitting, to build into a very nice portfolio that throws off a lot of income in a few decades.

What Dyson is really selling is a newsletter that searches for investments with high yields, and in many cases these can be the kinds of large companies that sponsor DRIPs, the stocks that Dyson has “teased” us with before have been a mixed bag and it’s been a small sample, so I have no idea what his overall performance has been. You can certainly subscribe to his newsletter if you like, but don’t buy it just to find out what a “1-share millionaire” is … buy it because you want to see if his ideas are good ones, and hold him to whatever standard you think is appropriate when deciding whether or not to cancel before the “trial period” is up. Like most large newsletter publishers, Stansberry will give you a money back guarantee for a certain period of time, though every publisher has different procedures and some make it harder than others (ie, depending on the newsletter you may not be able to email or cancel online, you might have to talk to someone on the phone and resist some further sales pitches).

If you believe that statement that “it’s almost impossible not to make money” then you probably haven’t paid a lot of attention to the stock market over the last six months. In the short term it’s always possible to make money, when you’re dealing with individual stocks it’s always likely that some of them will lose money, and even in the long term we certainly know that many stocks go down. Of course, historically speaking and using average, dividend included returns, you probably will make money with stocks, but that’s little comfort these days.

Which is probably why they had to go back a ways to get that “impossible not to make money” quote — it really did appear in a San Francisco Chronicle article, but it was back in 1997, two market crashes ago.

So … we’ve had all kinds of talk in these pages about DRIP plans before, and about dividends … anything more to add? Feel free to throw in your two cents below. Or one cent, if it’s been a bad week.

Happy Investing!


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46 Comments on "“One Share Millionaire” with the “U.S. Postal Secret”"

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Charles
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Charles
January 22, 2009 7:54 am

I'm a huge believer in using DRIP for growing my portfolio at this point in my pre-retirement life.

I trade with an online discount broker, and take a minute after purchasing a stock to set it up. I can't imagine doing anything more complex to get my dividends reinvested.

HOWEVER, I will say that a couple of times with overseas stocks, the dividend has been paid in cash to the account instead of in stock additions. But a quick phone call has sorted that out.

Graham Jervis
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Graham Jervis
January 22, 2009 7:56 am

Thanks for explaining that Travis

Elissa Stein
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Elissa Stein
January 22, 2009 7:57 am

The only reason to set up a drip is if the investor doesn't have enough cash to set up a brokerage account. Drips made sense when commissions were expensive. That hasn't been the case for years.

Bruce Porter Sr
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Bruce Porter Sr
January 22, 2009 8:13 am

I purchased a subscription a few years ago. Nothing special, probably equal parts loser and winner. Wasn't worth renewing.

Terry
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Terry
January 22, 2009 8:21 am
Hi Travis, I'm English and love your "show." Moreso the 'showing up' rather than the display! I confess I cannot remember how I found you but I believe it was searching Google for "Stansberry and reviews" Re: DRIPS. I am holding several Canadian Royalty Trusts in Oil and Gas and would have bailed out at the end of Sep07 had I been able. However,I was off-line for over a week at the time, moving home and they had crashed so far so quickly it was too late to save myself. So now I rely on their DRIPS as they each… Read more »
Prashant Mehta
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Prashant Mehta
January 22, 2009 8:24 am

I have 6 drip plans for last 8 years and I do not need to worry about daily fluctuations. The real problem seems to be calculating taxes when one decided to sell them as each dividend will need to be accounted differently I think. I have not sold any that I bought.

Any suggestions regrading calcultion for taxes?

woody pang
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woody pang
January 22, 2009 8:26 am

By golly, if we took advantage of this instant "1 share millionaire" deal, we wouldn't have to take the time to read the Gumshoe report every day.

But what would our life be without that daily dose of common sense?

On the other hand, with my new found riches, I could be a regular contributing member to the Travis Retirement Fund.

Cocoon
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Cocoon
January 22, 2009 8:38 am

Though I have done it, regular(not necessarily drips)reinvesting dividends is a bookkeeping nightmare after selling. The compounding principle still lives, but keep up to date on activities.

Donal McNally
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Donal McNally
January 22, 2009 8:56 am
I am heartily tired of getting all these tendentiously exaggerated messages from the Stansberry crowd. It's this "secret" or that "secret", but the moment you look at them you see only obviousness. Despite the tax accounting nuisance,I think DRIPs are OK for the LONG haul if you have confidence that the company will still be around in 20 or more years. For the short term, the accounting problem is simpler and if you can get a good run at a few compounded returns in excess of 10% and not lose your shirt on a big capital loss, that's not so… Read more »
SageNot
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SageNot
January 22, 2009 9:29 am
For those readers younger than myself, take a look at a water utility, + 3 other environmental divisions, that is both a growth stock & very high yielding too boot. If VE has a drip program, this could be a mouth watering investment for those into drips. http://finance.yahoo.com/q/pr?s=VE I stumbled across it while looking through The Street Authority Market Advisor's Hotest Stocks for 2009. You get paid very well while you wait. It's well known that hedge funds & other insts. were forced to sell (dump) VE due to last year's redemption's farce. Here's a simple 5yr lookback to prove… Read more »
Jerry G
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Jerry G
January 22, 2009 12:34 pm

Professor Emiritus Gumshoe, perhaps we could have a "Newsletter" voting system set up so that the TOP Newsletters could be ascertained. The past and present subscribers who used these newsletters could help us filter out the Winners and Losers!

sundaygirl
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sundaygirl
January 22, 2009 1:54 pm

I get the 12% Letter.

The DRIPs mentioned in the report are MCD and WMT – both of which involve purchasing more than 1 share to set up.

WMT is a 250 dollar minimum. Can't recall MCD offhand.

And Terry, that's how I found our mutual friend Mr. Gumshoe – trying to do a bit of "sleuthing" myself! 🙂

john sloan
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January 22, 2009 3:49 pm
HI Travis and all Great info as usual I bought 1 share of Ford each for several grand kids years ago – minimum purchase was the 1 share – no requirement for additional buys – but we bought a few more shares – fortunately sold the lot in 2006. Calculating basis price only required me to use my handy calculator and add up the dividends from all the statements we kept plus all the small inputs – the kids barely broke even. I started 1 share DRIP for myself in Motorola and Pennzoil also with no minimum purchases. There is… Read more »
Dusty
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Dusty
January 22, 2009 10:17 pm
My online broker does not do automatic reinvestments. I prefer to just accumulate dividend money in the brokerage account and add it to other money when doing a new stock purchase. It is very likely that the Canadian Oil Trusts will be fine. Check out the concept of "Peak Oil." Much of production and new oil projects is being cut back so that when world demand picks up again the price of oil will probably skyrocket. I love the idea of identifying the few newsletters that are actually worth subscribing to. It is probably in violation of a lot of… Read more »
Henry Chakoian
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January 23, 2009 3:58 am

Several thoughts. Drips are great for dollar averaging over several years, especially 401 Ks where possible and IRAs or Keogh plans. To determine costs at tax time on sales, take the average price over 12 months. Not applicable to IRAs and 401Ks A great new law just passed. Withdrawals from 401Ks and IRAs is optional. I stopped withdrawals and asked for DRIPS on my holdings. I will access needed funds from my regular account, taxes already paid. Same income, less taxes. Consider it.

An Old Guy in Northe
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January 24, 2009 5:41 am

Greeting ole gumshoe,

Only do DRIPs for a number of years now. Absolutely no hand-holding here — do your own picking and it is a somewhat limited universe to pick from. Also no instant gratification (i.e., you are never quite sure of your purchase price and/or the number of shares until you get the notification from the transfer agent. But have found it easier and cheaper that even the discount brokers. Selling is also easy but again no instant process. Have always done dividend re-investment.

John
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John
January 27, 2009 6:57 am

Has anyone heard ANYTHING (New News—IMF etc.)) regarding the Iraqi Dinar??

Don Cannavaro
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February 4, 2009 5:09 am

Where can I get the necessary forms to fill out for One Share Millionaire?

Jared Campbell
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Jared Campbell
February 9, 2009 4:39 am

Where does Stansberry & Associates get all the anecdotes about 1 share millionaires. They sound bogus. Are they legitimate?

Tim
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February 11, 2009 11:29 am

I appreciate people who render value, and do the homework that most of us wouldn't have time for. Thanks for clarifying things and for sound advice.

Tim Wilson

internetgoeslocal.com

Lorie L
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Lorie L
April 6, 2009 7:48 am

Thanks for wading through the hype to come out with some sense of it all…

Did I see somewhere that Stansberry was under some sort of inquiry or maybe even indictment?

FYI: Regarding Brokers: ScotTrade doesn't (can't) reinvest my dividends. Most brokers do…

Thanks again,

Lorie

PS: I'm signing up for your service for LIFE! Yer stuck with me… (TheDogKnows)

Paul Sells
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Paul Sells
April 6, 2009 4:09 pm

Any comments on the 3 opportunities that Chris is pushing in "The Weber Global Opportunities" latest report?

Debra
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Debra
March 12, 2010 3:05 pm

If you buy MSFT via DRIP and MSFT company is later bought out by Google, what are the benefits to me? When a company is acquired, is that beneficial to me for example, will my stock price be worth more since the company is being bought out?

Julie Wallsh
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Julie Wallsh
March 12, 2010 4:54 pm
I am waiting for the Wealth Society guys: Elliott Gue, Roger Conrad, Yiannis Mostrous, Gregg Early, Ben Shepard to be wrong on something! Been with them five years now — they have yet to disappoint me. they tout a broad range of things but always have an income portfolio around and also a list of Master Limited Partnerships (no good for IRAs) but great for everyone else; Roger Conrad does a great Utilities and a Canadian Trusts letter; all of these throw off great dividend, dependable dividend from solid companies that they have researched well and long . I am… Read more »
Kitty
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Kitty
March 13, 2010 5:33 am

We have had a little money in drips for about 30 years. All are worth more than we have originally invested except for GE which is failing miserably. We do not have anywhere near $1 million! We find no trouble keeping track (for sales) if we input the information into Quicken.

David A
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David A
March 7, 2014 10:06 pm
Forget DRIPS You can go out to ShareBuilder, and accomplish the same thing. Through ShareBuidr.com you can open an account and get 12 trades a month for $12.00. Do the math! That is $1 dollar per trade. It does not matter if you buy one (1) share or 100,000 worth of a stock. It cost $1.00. This is amazing. Now for the “catch.” The catch is that you have no control of when the trade transpires. It always happens on Tuesday, and usually around 10:00am (CST) or 11:00am (EST). But who cares. You are doing this like a DRIP, LONG… Read more »
Gravity Switch
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January 22, 2009 8:03 am

Generally true, I think, though there are exceptions (some DRIPS offer nice discounts, some people don't trust themselves to "Buy, reinvest and hold" if it's easy to sell, etc.). Compound interest/dividend reinvestment is a powerful part of long term investment success, but it's certainly a lot easier to do it in any discount brokerage account than through a dozen different DRIPs.

Doug
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Doug
January 22, 2009 8:27 am

In Canada, discount brokerages charge up to $29.95 a trade and/or from $4.95 to $9.95 a trade, if you are a frequent trader.

If for example one is only making a $100 trade, that would amount to from a 5% to a 30% commission. for a $1000 trade (which would be a rather large dividend amount), the commission would be from 0.5% to 3%.

Given the above, how does it make sense to reinvest small amounts of dividends on a regular basis using a discount brokerage account?

Gravity Switch
Admin
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January 22, 2009 11:44 am

Sorry, I'm not familiar with Canadian brokers. Every US account I've held allows for free and automatic reinvestment of most dividends — that should be (though isn't always, I imagine) a basic, included service for any brokerage account.

Sally G
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Sally G
January 24, 2009 5:59 am

Do discount brokers provide you with costs of reinvestments when you eventually sell your shares? Also, how do you evaluate service of discount brokers? (Actually, that is a question for a different conversational thread.) I have heard of one person who had trouble transferring his account from one broker to another without selling and buying back all his stocks. Is that common?

Gravity Switch
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January 22, 2009 11:48 am
I don't specifically, though the numbers I hear for "break-even" for oil sands projects have ranged from $35 to $70. The one concern about all trusts is to be certain that if you're reinvesting dividends it's because you like the long-term ability of the management to replenish reserves, not just because the math of compounding is appealing. If you reinvest your income in a depleting asset (like the US trusts all are, and I assume some Canadian trusts probably are), you have to be extremely careful. Reinvesting in a depleting royalty trust means, in effect, that you're continuously pouring income… Read more »
Gravity Switch
Admin
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January 22, 2009 11:50 am

Well put, sir! Also, when your ship comes in, please consider a generous gift to the "educate Travis' children" fund.

My life without the joy of readers like you would be far emptier — thanks!

Gravity Switch
Admin
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January 22, 2009 12:42 pm

Jerry, are you looking over my shoulder? I'm working on that now — if anyone wants to volunteer to be a review-writing, star-granting guinea pig, email me (ilovestockspam@gmail.com). Hope to get it launched soon.

robert zimmerman
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January 23, 2009 3:13 am

You have put your finger on the problem. Tax reporting can only be done by going to the transfer agent for the company, or maintaining records by yourself. If you like the automatic reinvesting idea, why not just use a mutual fund, and enjoy a diversified holding at the same time?

Gravity Switch
Admin
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January 23, 2009 4:22 am

Dusty, my assumption is that you'd have to go awfully far to be libelous in an opinion-based review system, since libel is generally interpreted to apply to things that are stated or implied as fact. (Slander is for spoken or "transitory" defamation, libel for published or written)

I'd hope that people would stick to sharing their experiences and rating newsletters based on how they worked for them individually, which should be protected free speech in most jurisdictions. But I'll be careful, thanks for the warning.

Gravity Switch
Admin
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January 23, 2009 6:40 am
Veolia has come up in this space several times, just FYI: The Motley Fool was teasing it in September when the shares were in the $40s http://www.stockgumshoe.com/2008/09/motley-fools-… and Roger Conrad touted it earlier last year when it was in the $70s http://www.stockgumshoe.com/2008/04/the-world%E2%… Be careful about assuming that the trailing yield will be maintained — European firms don’t typically focus as much on keeping a steady dividend, it’s much more likely to fluctuate than a dividend from a US “blue chip.” Still, that trailing yield is getting close to 10% … tempting indeed. They typically pay the dividend in one annual… Read more »
SageNot
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SageNot
January 23, 2009 8:04 am

Thanks Travis, Barron's has yet another yield listed, & if my eyes aren't failing me, VE has already gone ex-div., ouch!

Paul Tracey must be looking at the growth potential of this utility mostly, it's too late to gain their annual dividend this year it would seem.

One day we will have a substitute for fossil fuels, but there will never be a substitute for precious water me thinks.

mel
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January 23, 2009 9:20 pm

How do I access information on the montlhy list in Value Line?

Is there a web site for this?

Sally G
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Sally G
January 24, 2009 5:41 am

Are you sure that you are allowed to cost-average the share prices paid? I thought that was disallowed some time ago.

Sally G
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Sally G
January 24, 2009 5:53 am
The problem with mutual funds is that their share prices are not necessarily as stable as individual stock prices (not that anything's stable in this market!), as they are based on prices of many investments as well as the number of fund shares outstanding, which is greatly affected by redemptions and purchases, as I understand it. So far, almost all my mutual funds, which I did not watch as closely as stocks, have dramatically gone down in value despite reinvested dividends and now withdrawals. I would prefer a closed end stock fund such as Adams Express (ADX) or Rivus Bond… Read more »
Gravity Switch
Admin
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January 24, 2009 6:35 am
Mutual fund prices are not based on the number of shares outstanding — well, they are, but they don't change when shares come are created or retired, the price is based solely on the value of the underlying investments, including cash, divided by the number of shares. When someone creates a new share, the company gets that cash to invest, when they redeem, the company uses some of their cash to return to them. Of course, if they get a lot of redemptions they have to sell stock. Most mutual funds are significantly less volatile than individual stocks, but they… Read more »
Gravity Switch
Admin
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January 25, 2009 8:31 am
I don't know if there are monthly sites that give away Value Line's rankings for free, but Value Line would probably try to stop them if so. Most big public libraries subscribe to Value Line, usually in print form, so you could always stop by and look at them once a week if you've got a library handy. Some also subscribe to the online version and will give remote access to library card holders (this is, by the way, one of the least-appreciated awesome services of many U.S. public libraries, any resident can get online access to powerful and expensive… Read more »
Gravity Switch
Admin
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February 4, 2009 5:40 am

To enroll in DRIPs you usually need to contact each company directly, or else go through their transfer agent — I listed a couple of the major agents in the article above, but every company should list them on their website and list the availability of a direct investment or DRIP plan (often called DRIP or DSPP).

Gravity Switch
Admin
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April 6, 2009 10:18 am

Thanks Lorie! Glad to have you aboard for the duration.

Porter's case is still on appeal, I don't know when the appellate decision is likely to come — I think the last round of oral arguments was in December. He was taken to court by the SEC for a piece he wrote about uranium company USEC six or seven years ago.

Stansberry shared his perspective in his Digest back when he lost the last round, which was about a year and a half ago — you can see those comments here if you're curious:

http://www.stansberryresearch.com/pub/digest/arch

Juan Navarro
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Juan Navarro
April 20, 2009 4:14 pm

I signed up to a couple drips through to:

http://www-us.computershare.com.

It was very easy to sign up. It gives you all the companies that offer Dripps.

Nvestgrrl
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Nvestgrrl
July 15, 2009 1:47 pm

I'm with Jared — where do the anecdotes about 1 share millionaires come from? Is it legal to make them up? Because they sound made up.

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