Drip Drip Drip -- With No Brokerage Fees To Soak Up Returns, Dividend-Reinvestment Plans Keep The Profits Flowing.

You've heard of no-load mutual funds, but what about no-load stocks? While many companies offer dividend reinvestment programs, or "drips" - a method of buying shares of stock straight from the company using your stock's dividends or cash contributions - most have traditionally required that you buy at least one initial share through a broker.

Now, an increasing number of companies are allowing small investors to buy straight from them, eliminating the middleman.

"I call them no-loads; you can call them super drips or drips on steroids," said Charles Carlson, author of "No-Load Stocks" and "Buying Stocks Without a Broker." "They've taken drips to the next level."

But whether you've bought a no-load stock or gotten into a drip through your broker, these programs offer a way for the small investor to buy stocks without brokerage fees.

For no-load stocks, the quickest way to get into the program is to contact the company in question and request a prospectus and application for their program. Carlson likened the process to enrolling in a mutual-fund program.

Some programs require a minimum investment, but many will waive their minimums for a commitment to regular contributions.

When picking programs, be sure to check whether there are any fees associated. Some companies will charge a small fee to cover the costs of servicing accounts - mailing annual reports, statements and the like. This can cut into your investment's returns.

Take into account that there will be a lag between the time you send in your contributions and when your initial and subsequent purchases are made.

If you've chosen a stock that doesn't allow you to purchase your first share straight from the company, you'll have to buy it through a broker. If you do that, it's important to make sure that the broker registers the stock in your name, so that you'll receive the company's mailings and enrollment application for the drip.

Either way, once you're in the program, it then becomes a simple matter of contributing regularly and letting your investment grow.

For many small investors, drips offer an easy way to build a diverse portfolio with relatively little money, said Carlson.

Just ask Ed Burgess of Lexington, Ky. He and the 15 members of his investment club have invested in a broad range of stocks, all through drips.

"Our entire portfolio is in dividend reinvestment stocks," said Burgess. "This looked like an easy way to get a portfolio."

Fellow investor Ernie Cohen is another drip investor.

"It's a great way to compound your investment," said Cohen, whose drip portfolio includes IBM, McDonald's and several Baby Bells. "It forces you to put your money in the company."

Both Burgess and Cohen stressed the long-term nature of drip investing. These programs are not for investors interested in playing the market.

"These are not trading programs," said Carlson. "These are buy-and-hold programs."

Drip investing also has the advantage of helping reduce your exposure to risk.

"The primary advantage of drip investing is that it offers a relatively inexpensive way to take full advantage of the dollar-cost-averaging philosophy of equity investments," Burgess said.

"Dollar-cost averaging is the best way to take the worry out of the market, and drips offer a great opportunity to the inexperienced and experienced investor to implement that investment philosophy with minimum investment exposure."

The basic theory of dollar-cost averaging is that by regularly investing a fixed amount in a stock or other investment, you'll smooth out the highs and lows, eliminating the risks inherent in trying to time the market.

The advantages of drip programs do not necessarily obscure the drawbacks.

For example, be aware that the time lag inherent in drips can allow significant changes in a stock's price.

"The downside is that you don't have a whole lot of control over purchase price," said Burgess.

Like any other investment, drip stocks should be carefully researched. Check out a company before you decide to participate in its drip plan.

"Just because a company has one of these plans doesn't mean that it's good," said Carlson. "There's a lot of bad ones out there."

And just because drips have the feel of a savings account doesn't mean that you can treat them like one.

The long-term nature of drips can lead to complacency and inattention, which can lead to problems. If you don't pay attention to your drip investments, you might wind up pumping money into losing stocks.

"Just because it's been good in the past doesn't mean that it'll be good in the future," said Sharon Bird, vice president of investments for Lexington Investment. She urges investors to pay active attention to all parts of their portfolios, including their drips.

Carlson stressed the importance of good record-keeping for drip investors. Your paperwork will increase with each stock you add to your portfolio, and all your investments must be tracked for tax purposes.

"The biggest potential problem is when you sell shares," said Carlson. "If you don't have those records, you could have a train wreck of a record-keeping problem."

Drip plans and no-load stocks are part of a growing wave of choices for small investors.

A growing number of companies are starting programs to offer no-load stocks.

There are many reasons for this, said Carlson.

Some companies are uncomfortable with having the vast majority of their stock held by large institutional investors, who often buy and sell on market trends. Small investors, on the other hand, tend to buy stocks and hold onto them for longer periods.

Offering stock is also an effective way to raise money for a company, said Carlson. Offering drips and no-loads opens a whole new market for their shares: the small investor.

A more subtle motivation is a simple part of human nature. Investors - especially those with high-profile consumer-oriented companies such as Wal-Mart or McDonald's - are more likely to use the products or buy from the stores in which they've invested.

Carlson said he expects the number of drip and no-load programs to increase rapidly over the next few years.

Often, he said, one company in a market segment will start a program, and then its competitors rapidly follow with programs of their own.

"You're seeing a sort of follow-the-leader effect," Carlson said.

The profusion of drip plans and no-load stocks notwithstanding, the ultimate value of any dividend reinvestment plan reflects the value of the stock itself.

"If you think the company's solid enough to buy and hold, then participate in the drip," said Cohen. ----------------------------------------------------------------- Write, call or log on

A free listing of no-load stocks is available by writing to:

DRIP Investor Newsletter

7412 Calumet Ave.

Hammond, IN 46324

The Direct Stock Purchase Plan Clearinghouse, 800-774-4117, has an automated phone system that will allow interested investors to order the prospectuses and membership materials for up to five no-load stocks free of charge.

On the Web, the NetStock Direct Web site (http://www.netstock direct.com) offers a searchable database of companies offering drips, along with their contact numbers and other tips for drip investors. Potential investors can also order investment plan information from up to five select companies via e-mail.