Direct Stock Purchase Plan (DSPP): Definition and How It Works

A direct stock purchase plan (DSPP) lets individual investors buy a company’s shares directly from the issuing company, without going through a broker. The issuer may offer the plan directly to retail shareholders or route transactions via a transfer agent or other third-party administrator. DSPPs are designed to simplify participation by allowing investors to open an account and make periodic deposits, commonly monthly via ACH. The company then uses those deposits, and possibly dividends, to buy new shares or fractional shares automatically. Minimum deposits can range from about $100 to $500, and fees are often low or sometimes absent. For dividend-paying companies, dividend reinvestment plans (DRIPs) can be used alongside DSPPs, reinvesting cash on dividend dates. A key limitation is reduced liquidity, making shares harder to sell without a broker. The SEC regulates DSPP activity similarly to brokerage activity.