Overlooked and Underrated: Why Fractional Shares Matter

Buying fractional shares—less than one share of company stock, under an employee stock purchase plan (ESPP) is not a new concept, but hasn’t been widely used in practice yet — partly because companies simply aren’t aware of the tremendous value that fractional shares can offer. 

With stock purchase programs going through a new era of appreciation and plenty of employees out there who want to participate in these plans, now is the perfect time to consider introducing fractional share purchases into your program. Here’s why:

• ​ESPP’s are a savings vehicle and an opportunity to invest in the market. If your employees have allocated money to the company’s stock purchase plan as an investment, then all of that money should always be invested, precisely in the way that they intended. In other words, fractional share purchases allow participants to put every penny they contribute into the plan to work and immediately.​​
  
• Fractional shares add up over time! The sum of the shares can translate into hundreds, if not thousands of dollars into your employee’s pockets each year. That can mean the difference between financial success and living paycheck-to-paycheck. Investing builds wealth; holding cash does not.​
  
• Many of the very best performing stocks are trading in the hundreds or thousands of dollars! Employees can perceive these stocks as being too expensive, which makes owning parts of these companies inaccessible to most people. Fractional shares offer flexibility to the average employee by letting them have access to at least a part of the company. No matter how expensive a share may be, an employee can still own it!
• With a consistent schedule of purchasing fractional shares, employees will eventually own whole shares. Further, if a company pays dividends on those ESPP shares and provides for dividend reinvestment, share ownership increases further and adds up even faster!
• Those who could benefit from fractional share purchases the most are the ones who fail to claim these benefits.

It’s true; fractional shares offer a rainbow of benefits, and generally, with a few easy tweaks to your plan and the right solutions provider, you can add fractional share purchases to your ESPP right away. What’s more, you’ll win back time in no longer having to manage residual ESPP contributions following each purchase.