Many believe, especially for consumer brands, that a strong DSPP builds brand loyalty alongside investor loyalty. Also, because stock is held in the shareholder’s name – as opposed to a street name when stock is purchased through a broker – companies are able to communicate directly with their shareowners. This can be particularly beneficial during proxy season or when it comes time to vote on legislative action on behalf of the company.
Make your DSPP attractive to investors
A feature that dividend-paying companies can offer is a DRIP – or dividend reinvestment plan. This allows existing shareowners the ability to conveniently reinvest their dividends, gradually building share ownership. Investment plans allow shareholders to buy more stock and grow their investment over time by subscribing to the dollar-cost-average theory of investment.
DSPPs don’t have to be expensive to administer – in fact, there are low or no cost to the company options. Shift some of the cost to participants or offer EQ’s InvestDirect plan, which is paid by participants, saving the company certain routine out-of-pocket expenses.