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Direct Stock Purchase Plan

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A direct stock purchase plan (DSP) is a company-sponsored program in which the company sells shares of its stock directly to investors. Brokers are not involved in a direct stock purchase plan. The chief advantage of a direct stock purchase plan is that an investor avoids (or significantly reduces) commissions. Investors of limited means can participate, generally by buying a chosen dollar amount of stock. One disadvantage of a direct stock purchase plan is that when selling the stock back to the company, one cannot control the time or date of the sale. The direct stock purchase plan is not limited to small or unknown companies: many large, well-known companies participate. Each direct stock purchase plan is regulated by the SEC. A direct stock purchase plan is not the same as a dividend reinvestment plan.



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