Joining a trend to put some meat on what has been a bare-bones service, T. Rowe Price Investment Services Inc. said yesterday that it is starting a dividend reinvestment program for its discount brokerage customers.
The free service by the Baltimore-based mutual funds company gives customers the option of having their stock dividends or capital gains distributions from closed-end funds automatically reinvested in additional shares. Before this, the dividends were either mailed to the shareholders or transferred to a Price money market fund, according to Price spokesman Steven E. Norwitz.
"The Dividend Reinvestment Plan is a convenient way for investors to reinvest their cash dividends without having to make arrangements with separate firms," Maurice Minerbi, vice president and manager of Price's discount brokerage operation, said in a prepared statement.
Started 11 years ago, Price's discount brokerage operation has 50,000 customers.
While reinvestment of dividends has long been practiced by mutual funds and various companies serving their own shareholders, it has only recently been adopted by discount brokers, who offer a no-frills alternative to regular brokers.
Charles Schwab & Co., country's largest discount broker, started offering dividend reinvestment in 1992 for a small fee, which was dropped last August. Likewise, Quick & Reilly Inc. of New York, the nation's No. 3 discount broker, started a reinvestment program in July, according to spokesman Leslie C. Zuke.
Fidelity Investments of Boston, the second-largest discount broker, will not have a reinvestment program until fall, a spokeswoman said.