What are compound stock shares?

Answer 1

I believe a "Compound Share" is simply another name for a Dividend Reinvestment Plan or DRIP. I was led to this site after reading some internet junk mail that mentioned an investment opportunity of investing in Compound Shares, and careful reading between the lines led me to the conclusion that they were talking about DRIP programs. I believe the selection of the term 'Compound Shares' was specifically designed to obfuscate their intention, which was to sell subscriptions to some kind of program about DRIPs. Google 'DRIP' and you will find out everything you need to know, but I'll briefly summarize. Many companies offer DRIP programs as a way to make their shares available directly to the public, often with no cost at all to the purchaser (although there's usually a minimum investment, and some DRIP programs require you to already be an owner of the stock via an over-the-counter purchase (through some kind of broker.) Often this is handled through the share reqistration agent as a service to the stock issuer (and the issuer covers all the expenses.) It's a pretty good deal, when you consider that as an investor you are paying little or no fees for the registration agent to handle your stock. A downside is you lose some flexibility in selling your stock. You may be able to issue a sell order, but have little control over when it is executed, and lose the ability to issue limit orders and things like that. These programs probably vary somewhat. The 'compounding' is implicit in a DRIP, because dividends will be reinvested in fractional shares. I have done this with shares in my company. I purchased the shares through a corporate purchase program, but then transferred my shares into the DRIP program so that my dividends would be automatically reinvested in the stock, otherwise, the dividends would only be available as a cash payment. This has had no cost for me, and over the years I've accumulated quite a few additional shares from the 'drip.' I also know that in my program there is no cost to issue certificates, to sell, or to transfer. In fact, I've done all three. These programs may vary though. I am in no way a finance professional, I just took some finance courses in business school and listen faithfully to Bob Brinker's radio show. He occasionally fields questions on DRIP programs there, which is where I first heard of it.