The best DRIPs are the kind of safe, long-term income stocks you want to give your grandchildren for Christmas. Here are three that I like.
These stocking stuffers don’t require fighting the holiday crowds, standing in long lines, or endlessly surfing through Amazon.com or Rakuten or your favorite department store’s website to find the perfect gift. Instead, these stock ideas are tailor-made for your nieces, nephews, or grandchildren who have way too much of every toy or game already. These are alternative gift inspirations that keep giving over their lifetimes and are ideal for teaching the young folks about money and investing!
I’m talking about Dividend Reinvestment Plans (DRIPs). A DRIP allows you to automatically reinvest cash dividends by purchasing additional shares or fractional shares on the dividend payment date. According to www.DividendInvestor.com, more than 1,100 companies and closed-end funds offer DRIPs. But what are the best DRIPs?
Find out which dividend stocks to buy today for high dividends with low risk in this FREE Special Report: Cabot's 5 Best Dividend Stocks.
Chief Analyst Tom Hutchinson has a long track record of successfully building wealth and providing a high income for his private and corporate clients. Now you can benefit from his decades of experience—FREE!
Get My Free Report Now
When my nieces and nephew were born, my relatives couldn’t buy enough toys and clothes for them. It was mass consumerism at its best! But I wanted to buy them something that they wouldn’t soon tire of or grow out of, and would also have long-term positive effects on their lives. And I also wanted to teach them about money.
So, I began buying them shares of McDonald’s (MCD) stock via a DRIP. I chose McDonald’s as it was a company with which they were familiar. And over the years, I added to their DRIPs, and talked to them about the company whenever the annual report showed up. I do have to admit, though, that they were much more enthused about the coupons for free hamburgers that were included in the report than in my finance lectures!
Nevertheless, when they graduated from high school, they each had a tidy sum to help allay college expenses. It was an easy way to give them a gift that kept on giving.
Companies that operate their own DRIPs will often let you buy additional shares of their stock commission-free, and sometimes even at a discount to the current share price. In my Wall Street’s Best Digest newsletter, I follow two investment pros who keep a close eye on dividend reinvestment plans—Charles A. Carlson, editor of DRIP Investor and Vita Nelson, editor of DirectInvesting.com. Each month, they offer great insight into the DRIP industry, as well as a selection of recommended stocks.
DRIPs are often recommended for long-term investors. Buying and selling shares in a DRIP is not as easy as picking up the phone and calling your broker. Most companies buy and sell shares in a DRIP in bulk (to reduce transaction fees), so you are most likely not going to get current market prices. It may take a few days to get in or out, so if you tend to trade stocks, a DRIP would not be your best investing vehicle.
But DRIPs are a great way to invest in well-managed, financially stable companies—for the long term. And they make great stocking stuffers!
I searched my databases, and ran my numbers to find the best DRIPs that are fundamentally strong companies, with growing sales and earnings. And I’ve found three that I think you’ll like, and will immediately recognize. That brand name recognition, I think, is important when you are considering a long-term investment like a DRIP.
The Best DRIPs to Give Your Grandchildren
Best DRIP #1: Emerson Electric Co. (EMR)
Emerson Electric Co. (EMR) is an engineering company, serving the oil and gas, refining, chemicals and power generation, pharmaceuticals, food and beverage, automotive, pulp and paper, metals and mining, and municipal water supplies markets. Products include residential and commercial heating and air conditioning products, environmental control systems for use in medical, food processing, and cold storage applications, and professional and homeowner tools, and appliance solutions.
- Dividend yield: 2.28%, quarterly
- Beat analysts’ EPS estimates by $0.03 last quarter
For DRIP information:
Attention: Emerson Electric Co.
P.O. Box 505000
Louisville, KY 40233
Toll Free: (888) 213-0970
Best DRIP #2: Illinois Tool Works Inc. (ITW)
Illinois Tool Works Inc. (ITW) sells industrial products and equipment including automotive OEM components, food equipment, test & measurement and electronics, welding, polymers & fluids, construction products, and specialty products.
- Dividend yield: 2.08%
- Beat analysts’ EPS estimates by $0.01 last quarter
For DRIP information:
Broadridge Corporate Issuer Solutions, Inc.
P.O. Box 1342
Brentwood, NY 11717
Tel: (888) 829-7424 (U.S.)
Best DRIP #3: Kellogg Company (K)
Kellogg Company (K) makes ready-to-eat cereals and convenience foods, including crackers, cookies, crisps and other savory snacks, toaster pastries, cereal bars, granola bars and bites, fruit-flavored snacks, ready-to-eat cereals, frozen waffles, veggie foods, and noodles.
- Dividend yield: 3.65%
- Beat analysts’ EPS estimates by $0.16 last quarter
For DRIP information:
Kellogg Shareholder Services
Toll Free: (877) 910-5385
As always, you’ll want to make sure that these companies fit your personal investing needs, but for the long term, they look to be solid, money-making additions to your or your young friends’ portfolios.
Nancy Zambell, Chief Analyst of the Financial Freedom Federation, has spent more than 30 years helping investors navigate the minefields of the financial industry. Nancy's book, Make Money Buying & Selling Stocks is an introduction for new investors and a reminder for experienced investors on how to profit in the stock market.Learn More
*This post has been updated from an original version, published in 2019.