The saving grace of a down stock market year such as 2008 is that it makes top-quality stocks available at reduced prices.

Biggest beneficiaries are savvy investors committed to an ongoing program of investment in solid dividend-producing companies with promising long-term potential.

Continuous investing means fluctuations in the market don't faze them and downturns actually represent attractive purchase periods. Their personal investment machine keeps chugging along no matter what.

Dividend-reinvestment plans, or DRIPs, fit perfectly into that strategy.

These company-run plans permit investors to invest in a firm's stock with a small initial outlay and continue to reinvest dividends to buy additional shares. They can periodically make additional purchases of shares from the company as well.

About half of the 1,200 available DRIPs let investors buy their initial stock directly from the company without a broker. For the others, investors must first buy the initial stock from a broker in order to enter the plan.

Despite the growing popularity of DRIPs, one notable aspect isn't widely known.

"A significant trend that people are generally unaware of is the substantial growth in number of DRIPs allowing U.S. investors to buy shares in foreign companies," said Charles Carlson, editor of the DRIP Investor ( newsletter in Hammond, Ind., which also publishes an annual DRIP directory. "About 300 foreign companies from 38 countries now offer DRIPs for their American depositary receipts."

Each American depositary receipt, which is issued by a bank, represents one or more shares of a foreign stock or a fraction of a share.

Some foreign DRIPs Carlson considers noteworthy are the Finnish telecom Nokia Corp. (NOK); French energy firm Total SA (TOT); German software company SAP AG (SAP); China Mobile Ltd. (CHL); India's Infosys Technologies Ltd. (INFY); and Japan's Sony Corp. (SNE) and Honda Motor Co. (HMC).

"Investors may think their only option for foreign investing in smaller amounts is a mutual fund, but DRIPs offer them another possibility," said Carlson, noting that many investors are seeking to diversify away from strictly U.S. investments these days.

DRIPs should be considered core portions of an individual's long-term portfolio because they do tie up money. They weren't designed for investors to jump in and out but rather offer them a chance to start small and build gradually.

Starting a DRIP might be a prudent way to spend an economic stimulus check received from Uncle Sam.

"The concept behind the government's economic stimulus check is to spend that money, but it would be smarter to use it to invest in a diversified DRIP portfolio of stocks," said Vita Nelson, editor of The Moneypaper in Rye, N.Y., which has a searchable DRIP directory on its site, "By continually investing in core companies that aren't going to disappear, you can take advantage of market volatility."

A sample diversified portfolio of no-fee DRIPs from Nelson includes life and health insurer Aflac Inc. (AFL); tool and appliance maker Black & Decker Corp. (BDK); beverage firm Coca-Cola Co. (KO); spirits, hardware and golf company Fortune Brands Inc. (FO); and health-care giant Johnson & Johnson (JNJ).

"Select five or six companies, each from a different industry, and then fund their DRIPs monthly, quarterly or annually over the years," Nelson said. "Many DRIPs allow automatic debiting from your bank account, so you can take the market out of the equation and not go nuts over it."

Minimums for initial and subsequent purchases vary among DRIPs, as do fees. Many have an enrollment fee of $5 to $15 and purchase fees of $1 to $5. Fees are important, though the quality of the company whose stock you're buying is more important.

DRIPs require careful record-keeping for tax purposes because you must know the cost basis, or original price, of the stock holdings you're amassing. That requires maintaining records of purchases in paper or electronic form. You'll need to calculate capital gains tax when shares are sold and provide proof of the cost basis.

One problem among DRIP investors is the tendency to put the money in DRIPs of stocks that are too similar, such as three drug companies, or invest in too many DRIPs because they like collecting them. In addition, since DRIPs are usually offered by better-known firms with steady dividend flow, they represent larger companies and you won't find many smaller-cap DRIPs.

The DRIP of Aflac, the top provider of "guaranteed renewable" insurance (which is renewed regardless of changes to the insured's health) in the U.S. and the top provider of individual insurance policies in Japan, is recommended by both Nelson and Carlson.

That company has increased its dividend for 25 consecutive years. Its DRIP offers direct purchase for initial shares and no fees to buy additional shares. Minimum initial investment is $1,000, with subsequent investments for as little as $50. There is no enrollment fee and there are no ongoing purchase fees.

Here are some other "fee-friendly" DRIPs recommended by Carlson:

• Becton, Dickenson and Co. (BDX) — Medical technology

• Emerson Electric Co. (EMR) — Technology

• Energen Corp. (EGN) — Energy

• ExxonMobil Corp. (XON) — Energy

• Lockheed Martin Corp. (LMT) — Aerospace and defense

• Paychex Inc. (PAYX) — Payroll and human resources services

• Pepsico Inc. (PEP) — Soft drinks and food

• ProLogis (PLD) — Real estate investment trust

Andrew Leckey answers questions only through the column. Address inquiries to Andrew Leckey, P.O. Box 874702, Tempe, AZ 85287-4702, or by e-mail at [email protected]