Category Archives: drip

A DRIP in the Bucket

A DRIP in the Bucket

A DRIP in the Bucket

MARCH 10, 2011
One of the downsides of using ETFs—as opposed to index mutual funds—is that dividends and interest are not automatically reinvested. Instead, they are paid in cash, where they often sit idly in your brokerage account for months. This happens even more frequently now that many ETFs have started paying distributions monthly, rather than quarterly as in the past.
To address this issue, both Claymore and BMO offer dividend reinvestment plans (DRIPs) for their ETFs. For those who are unfamiliar with DRIPs, they allow investors to receive distributions—whether dividends from stocks, interest from bonds, or return of capital—in new shares rather than in cash. Only whole shares are possible: so if the ETF is trading at $20 and you’re eligible for $67 in dividends, you’ll receive three new shares plus $7 in cash.
If the amount of email I am receiving is any indication, these programs are extremely appealing to investors. Indeed, I have heard from people who are specifically choosing ETFs from Claymore and BMO rather than those from iShares because of the DRIP feature. (iShares does not currently offer such a program.) I believe this is an error in judgment.
While the automatic reinvestment of dividends is convenient, it should not be a major factor in determining which ETFs you use to build your portfolio. Here’s why:

Synthetic is Just as Real

ETF investors may not realize that discount brokerages offer “synthetic” dividend reinvestment plans. Unlike traditional DRIPs, which originate with the company issuing the stock or ETF, a synthetic DRIP is handled on the brokerage side. The ETF pays its distribution in cash, and the brokerage then purchases new shares in your account, without charging a commission.
There is no meaningful difference between the DRIPs offered by Claymore and BMO and the synthetic plans offered by brokerages.
Every brokerage handles things a little differently, and not every ETF is eligible, but most of the major firms support synthetic DRIPs for iShares ETFs. When I put the word out, investors confirmed that is the case at TD Waterhouse, CIBC Investor’s Edge, RBC Direct Investing, Scotia McLeod and iTrade. If you use another brokerage and can confirm whether they offer this service for iShares ETFs (and if so, for which specific funds), please share with your fellow Couch Potatoes by leaving a comment at the bottom of this post.
Unfortunately, fewer Canadian brokerages seem willing to reinvest dividends from US-listed ETFs. If yours does, again, please share below.

Don’t Let DRIPs Be the Driver

The most important factor in your decision should be the investment strategy that the fund uses. Even if your brokerage does not allow you to DRIP a specific ETF you’re considering, it shouldn’t influence your decision.
The fact is, over the long run, whether you use DRIPs or simply collect your distributions in cash and reinvest them a couple of times a year (any time you add new money or rebalance) is not likely to have any significant effect on your returns.
The same can’t be said about ETFs that use different strategies. Most iShares equity ETFs are traditional cap-weighted index funds, while Claymore’s flagship products use a fundamental indexing strategy. BMO, meanwhile, has introduced a number of ETFs that use an equal-weighted strategy. Over time these differences are likely to have a much greater effect than the immediate reinvestment of dividends.
All of these ETFs may be good choices, and no one knows which of these strategies will outperform going forward. But the point is that you should select your investments based on your confidence in the strategy, not on the availability of a DRIP.
{ 22 comments… read them below or add one }
Mike Holman March 10, 2011 at 8:54 am
Good info. I’ve known about the synthetic drip available at brokerages for a while, but I imagine that lots of people don’t.

Questrade offers a synthetic drip. I’m positive it includes the Canadian iShares ETFs – I remember asking them a while back. I’m not sure if they offer it for US-listed ETFs or not.

Marianne March 10, 2011 at 9:23 am
Thanks Mike. I do use TD’s drip on all my investment accounts – works well. I always wondered if when I drip non-RRSP/TFSA accounts, are the dividends considered taxable even though re-invested in shares? I don’t think this would be the case with automatic drips. Do you know how this is handled?

Canadian Couch Potato March 10, 2011 at 9:32 am
@Marianne: If you use a DRIP in a taxable account you are still responsible for paying the taxes, even if the distributions are received in shares rather than in cash.

Brandon March 10, 2011 at 9:34 am
I was researching synthetic DRIPs just yesterday, and I read on the Financial Webring Forum that you can DRIP some of the Vanguard ETFs with TDWH. This would be helpful in order to avoid forced currency conversions.

Here is the link to the thread – bottom of page 10: http://goo.gl/ZZz6g

Pascal March 10, 2011 at 10:22 am
I have synthetic DRIPs setup for VTI, VEA and VWO for the last 12 months at TDWH. They worked well at distribution time in December. It appears that TDWH converts the cash distributions at US-CAD foreign discount rate, then buy the corresponding number of Vanguard ETF shares.
Cheers

Flagen March 10, 2011 at 11:59 am
@ Pascal and CCP – I have the same three Vanguard etfs dripping at TDWH and they confirmed for me that they drip whole shares in $US before making any conversion and any remainder is paid out in Canadian using the current exchange rate. It’s not ideal for avoiding foreign exchange fees, but not too bad.

Canadian Couch Potato March 10, 2011 at 12:26 pm
Great to know that TD Waterhouse will do this with Vanguard ETFs. I know that Scotia iTrade does not. Curious about other popular brokerages. Has anyone successfully DRIPped US-listed ETFs from providers other than Vanguard?

The Dividend Ninja March 10, 2011 at 2:17 pm
Hi Dan,
TD Waterhouse will not DRIP Claymore as of my last enquiry

Canadian Couch Potato March 10, 2011 at 2:47 pm
@Ninja: That’s odd, because Claymore’s site indicates that virtually all brokerages support their DRIP. I’d suggest you email Claymore and ask if there’s something specific you need to do.

Paul March 10, 2011 at 4:11 pm
I see DRIPs as tiebreakers…. but there are a lot of ties among various ETFs which are awfully similar, or strategies I’m not equipped to seriously compare (XRE vs ZRE for example). For that reason, for bonds I see Claymore’s as being more interesting simply for the DRIP.

What I like most about DRIPs is that they mean I can “forget” my investments…. if I don’t look at them for 3 years, there shouldn’t be as much of a loss from un-reinvested dividends as without DRIPs.

I’m with BMOInvestorline, who have no DRIPs other than a list of 60 stocks, plus their and Claymore ETFs.

Open source portfolio March 10, 2011 at 4:16 pm
I think drips are a great idea for the passive investor. However, I like to fine tune my investments and accumulate the dividends in cash. Once I see a good deal I’ll use that cash reserve to invest.

Andrew Hallam March 10, 2011 at 8:15 pm
Nice article Dan,

I guess I was under the impression that if a brokerage (like Investor’s Edge, for example) reinvested dividends for investors, then it didn’t matter what ETF or stock it was. It sounds like I was wrong. When I lived in Canada, I thought they’d reinvest dividends from anything with a dividend pulse. They did it with every stock and ETF I owned. So what’s the deal? Will they or won’t they reinvest dividends for anything with a dividend pulse? From what you (and other readers are suggesting) it’s selective. And I must just have been very fortunate with the holdings I had.

Canadian Couch Potato March 10, 2011 at 8:39 pm
@Andrew: It’s definitely selective at most brokerages. I have no idea how they make their choices, though. It seems pretty random.

S.J. March 10, 2011 at 9:14 pm
@The Dividend Ninja & CCP: I DRIP Claymore’s CBO inside my TD Waterhouse SDRSP account, so I’m certain it’s possible. Now… whether it’s Claymore’s DRIP or TDW’s ‘Synthetic’ DRIP, I’m really not sure. But, it’s there every month.
Cheers.

David Jones March 11, 2011 at 12:28 am
My accounts are at RBC Direct. They drip only some ETFs. I hold both i-Shares and Claymore and I have asked several times why they only drip some of my ETFs and not others. I have never been able to get an answer. As suggested, it appears totally random what they will drip.

gibor March 11, 2011 at 12:38 am
TD Waterhouse for sure doing DRIP for Claymore’s CBO

MoneySheep March 11, 2011 at 8:39 am
For DRIP of stocks (or ETFs), I believe the underlying companies actually issue new stocks to the shareholders. This has a dilusive effect. (This is contrasted with companies buying back shares, the earnings/dividends in the next round are divided into smaller number of shares). So DRIP is not good for shareholders overall.

Canadian Couch Potato March 11, 2011 at 8:53 am
@MoneySheep: That isn’t true. Individual companies may issue additional shares and pay these as “stock dividends,” which do dilute equity. But the situation is not the same with an ETF.

ETFs are open-ended, like most traditional mutual funds. This means that when they receive new inflows of money (and that includes cash dividends that are returned to them), they purchase additional assets. They don’t just slice the pie into thinner pieces.

Michael Davie March 11, 2011 at 12:13 pm
Qtrade (not to be confused with Questrade) drips at least some iShares ETFs; I have one set up with them for XBB.

My Own Advisor March 11, 2011 at 5:28 pm
Nice post Dan.

Right or wrong, I pretty much DRIP everything I own, unregistered stocks, stocks in TFSA, stocks in RRSP and ETFs in RRSP. I want to take advantage of those investments buying more investments as much as possible.

DRIPs are never the sole driver for an investment selection, but it’s certainly a nice perk

Have a good weekend!
Mark

Chris March 11, 2011 at 5:37 pm
I have a DRIP going on XBB, XIU, XSP and XIN with Qtrade.

I too use DRIP wherever I can, and have never had a problem. Individual stocks and ETFs (although I’ve never done a US ETF).

Canadian Couch Potato March 11, 2011 at 9:53 pm
@Mark: I agree that DRIPs are a nice perk — I use them myself, too.

Thanks to everyone who everyone who shared their experience with various brokerages. Hope other readers found this useful.

The Upside of DRIPs: Debunking Myths

The Upside of DRIPs: Debunking Myths: “Other Websites of Interest”

The Upside of DRIPs: Debunking Myths

-Robert D. Gibb
One never knows where things will lead. After officially retiring in 2008 so many things, projects and business offers came out of the woodwork there was hardly a moment to breathe or should I say “gasp” during the financial meltdown. Did you see anyone smiling during the meltdown? If you did, likely they were DRIPpers. The projects have slowed down and the business offers are under control so now I can once again turn my attention to talking about what one writer, whose name I can’t recall, once referred to as the most boring form of investing: DRIPs. Then again didn’t Peter Lynch say, “Boring is good.”? So here’s a boring story.
A little background:
Recently, I had the good fortune to be interviewed by both the Globe & Mail and the National Post about DRIPs. Whenever the topic of DRIPs arises my wife’s eyes invariably roll to the back of her head. This time excitement reigned when the Globe & Mail photographer asked her to pour a bucket of water over my head to visualize the concept of DRIPping. It’s the first times she has smiled when the topic of DRIPs has come up.
Something I stress with every writer interviewing me is that to a DRIPper it is not the reinvestment of dividends that is most important but the use of the fee-free stock purchase plan or SPP while income averaging. Invariably when the articles come out the writer has focused on reinvestment. This is to be expected. When it comes to stocks these writers deal in a world that is 99% moment in time investing whereas DRIPpers invest across time. The media is constantly telling us that over 40% of stock market gains can be attributed to reinvested dividends. That’s sexy to these writers. General media writers do not fathom the concept of an SPP. They spend their days writing for people focused on investments of tens of thousands of dollars or more. Truth is the average DRIPper invests $300 per month. That’s mutual fund territory. At the same time a methodical DRIPper can produce amazing gains, far outstripping mutual funds that across time can be richly rewarding.
Mark J. Heinzl in his book “Stop Buying Mutual Funds” pointed out that placing a $10,000 investment in the average Canadian equity mutual fund over 30 years created an end value of $98,000 for an $88,000 profit. To a naïve investor that might seem a tremendous accomplishment. What wasn’t obvious was the $77,000 the fund company drew off with a 2.1% average MER. The fund company made almost as much money as the investor. GlobeFund as of Aug. 31 2010 lists the average MER at 2.45%.
Is there a better way for mutual fund investors? For some it is Index funds. For others it is income averaging a portfolio of no or low-fee DRIPs and taking advantage of dips or opportunities when they happen. This article will look at some of the advantages that DRIPs have that are often missed by general media writers.
The general media describes income averaging as investing the same amount of money each and every investment period. As an example someone might buy $100 worth of a particular income fund on the 1st of every month. Two polls I’ve conducted on separate websites show that over 75% of DRIPpers income average differently. Most send varying amounts of money to differing companies depending on current conditions. Bank of Montreal (TSX: BMO) might be sent $500 one month while Enbridge (TSX: ENB) is sent $250 the following month. During the financial meltdown 80% of smiling DRIPpers increased the amount of optional cash purchases (OCPs) specifically the banks. So what was the upside?
I’m going to look at two companies I focused on during the meltdown, Bank of Montreal and The Bank of Nova Scotia. Being an aggressive-conservative strategic investor I like to play dips when they happen. DRIPs allow this especially those that allow monthly OCPs. My observation is a stock’s price falls much quicker than it recovers in unusual circumstances. The media often tells us no one can pick a bottom. However, making monthly purchases after a fall can sometimes be a good way to find an average bottom.
How can this be worked to advantage? The conservative in me favours income averaging. The aggressive maintains a focus on price dips. The strategic keeps a cash reserve for special circumstances such as temporary bad news.
Money, rather than companies, is income averaged on a monthly basis. That is, I send money somewhere monthly but not always to the same company. During the financial meltdown, as in the long run, I viewed this as temporary the focus became the banks.
During 2008 prior to the financial meltdown the average price paid for DRIP shares was:
BMO: $46.62
BNS: $48.32
After the meltdown money from the cash reserve was used to increase OCPs up to three times the usual monthly amount.
BMO 2008 – 2009
Dec
Jan
Feb
Mar
Price
30.16
32.05
25.96
33.22
Average price paid: $30.35
Current price: $61.65
Unrealized Capital Gain: 103%
BNS 2008 – 2009
Nov
Dec
Jan
Feb
Mar
Apr
May
Price
31.94
30.34
26.11
31.73
34.39
37.85
Average price paid: $32.06
Current: $55.30
Unrealized Capital Gain: 72.5%
Until Basel was settled and the banks began talking about dividend increases again I have made no further investments in either bank. DRIPs provided the flexibility to take advantage of the financial meltdown with increased contributions to specific equities for only the cost of a stamp. An added benefit is these specific purchases are also yielding 7% to 9% roughly equivalent to a 12% to 14% bond.
So while media writers focus on reinvestment of dividends when it comes to DRIPs mostly the DRIPpers are focused on the stock purchase plan (SPP) and its ability to create good to great capital gains for small investors during special opportunities. DRIPpers can pick their opportunities more easily than mutual fund investors while paying the MERs to themselves.
Let’s look at a few other items the media seems to get wrong too often:
1. DRIPs have too much paperwork and it’s too hard to track your ACB (adjusted Cost Basis).
I read an article today where a writer said if you have 15 DRIPs you’ll get 4 statements a year per company and it would be too much work calculating an ACB from 60 statements. I wonder if this writer is still using a typewriter. Today spreadsheets that automatically calculate ACBs abound. Entering 60 items would take about 30 minutes a year or about 35 seconds a week to input. Quicken works. Free spreadsheets are located here:
Personally, I like David Stanley’s approach to the problem of calculating ACBs. He says he’ll let the government figure it out after he has passed on.
As for the paperwork the final statement of the year for most companies has all the year’s information on it. You can throw out the other 75%.
2. You have to get the first share through a broker which is often expensive.
I have over 30 DRIPs. Only two were purchased through a broker. The rest were purchased through MoneyPaper.com (with whom Canadian MoneySaver subscribers get members’ discounted prices), group purchases and trades with friends or over the Internet. This has saved $2,000 in commissions (which according to Heinzl would be worth about $35,000 in a no-fee Index fund or ETF in 30 years.). People are exchanging thousands of shares, one share at a time on the Canadian MoneySaver discussion boards or at the DRiP Investing Resource Center for little or no cost.
3. You have to take your shares to a broker to sell them.
While this was true years ago most DRIPs handled by Computershare Canada can be sold through the plan as can a couple of companies handled by CIBC Mellon. Commissions vary but are often around $15 for the sale plus a few pennies per share sold. Virtually all US DRIPs can be sold through their respective plans.
4. You can’t name your price.
Yes, however transfer agents are required to get the best price possible. Commonly shares are priced as the average of all board lots (multiples of 100 shares) traded on the open market over a 5 day period. As to naming a particular price, the same people saying that are also saying, “You can’t time the market”.
5. You can’t name your price on reinvested dividends either.
Dividends can always be taken in cash and added to a separate OCP, brokerage or bank account.
It seems DRIPpers will have to continue to educate the general media one writer at a time. It’s not the reinvestment of dividends that is the big deal. It’s strategic income averaging through the SPP that has the potential to create the biggest return. I never even discussed the $5 & $6 purchases made in H&R REIT (TSX: HR.UN) during this period now trading above $19. Who cares about a 5% yield when you can get a 200% to 300% capital gain?
Needless to say, not all my DRIPs are winners. I own Bank of America and Pfizer in the US, but give them some time!
Yes, we DRIPpers have smiles on our faces but I hear my wife calling and I think she has another bucket of water. I can’t wait to tell her about Grace Groner who died recently at 100 years of age. Seems in 1935 she bought 3 shares of Abbott Labs (NYSE: ABT) for a total cost of $180. She left them in Abbott’s dividend reinvestment plan and willed them to her local community college. They were worth $7,000,000 yielding about $250,000 per year. If only she’d used the SPP as well.
Robert Gibb, 401-2910 Cook Street, Victoria, BC, V8T 3S7 (250) 383-7075 gibb_robert@hotmail.com. Robert Gibb is a retired school teacher. He gives seminars on dividend reinvestment plans. Mr. Gibb is a frequent contributor to Internet DRIP boards under the nickname OperaBob.

DRIPS Are for Kids (and All Kinds of Grown-Ups Too) – Seeking Alpha

DRIPS Are for Kids (and All Kinds of Grown-Ups Too) – Seeking Alpha
Starting Small
Company-sponsored Direct Investment Plans, or DRIPs (originally Dividend Reinvestment Plans) offer people the opportunity to invest small amounts over time, taking advantage of compounding. They also make it affordable for even the smallest investors (literally and figuratively) to create a diversified portfolio without even having a brokerage account. Opening a DRIP for a child (as a custodial account) is a great way to teach that child about money, investing, and the value of time, and it also creates the opportunity to do what many of us only wish we had done…to start early and build a great college fund or even a retirement nest-egg. And, of course, DRIPs are offered by some of the greatest dividend-paying companies on Earth.
Many people confuse these plans with the option to reinvest dividends that many brokers tout in order to keep investors’ assets in-house, but there are important differences. Brokerage “DRIPs” may come with fees and often are restricted to buying only whole shares, not fractional shares, as “real” DRIPs do. More important, company-sponsored plans allow the participants to invest small amounts of cash in additional shares and fractions, often without fees or commissions. By contrast, the brokerage versions have no cash-purchase feature, so if the investor wants to buy more shares, then he or she will be subject to the usual commissions and will have to buy whole shares.
Although some DRIPs have adopted fees, there are still hundreds of corporations that still offer no-fee plans. As you can see from this listing, that includes great companies like 3M (MMM), Abbott Labs (ABT), AFLAC (AFL), Baxter International (BAX), CenturyLink (CTL), Church & Dwight (CHD), ConocoPhillips (COP), Dr Pepper Snapple Group (DPS), Emerson Electric (EMR), Genuine Parts (GPC), PepsiCo (PEP) and many, many more. And quite a few of these firms are Dividend Champions, Contenders, and Challengers that have increased their dividends for many years without missing a beat.
The Gift that Keeps on Giving
When it comes to saving for college, many parents think of 529 plans, but these vary greatly in quality from state to state and, like many institutional products, are difficult to judge in terms of cost, let alone understanding what they invest in. But if you fund an account that invests in stocks like General Mills (GIS), Hasbro (HAS), or Norfolk Southern (NSC), you know exactly what you’re getting (and what you can expect). Best of all, every penny of every dividend and every cash investment can go toward buying shares (and fractions) that can compound over time.
The benefits of dollar-cost averaging and diversification don’t have to be limited to building a college fund, either. Occasions such as birthdays, weddings, graduations, bar/bat mitzvahs, and more are the perfect time to give something more meaningful than a blender or a gift card. In fact, if you visit this site, you’ll find it convenient to give the gift of stock that includes enrollment in a wide variety of companies. If you (or they) doubt that your gift can put them on the road to financial wealth, try an investment calculator, like the one at the General Mills site, here.
Best of all, opening one or more DRIPs is perhaps the best way available to get started in investing, without taking on a lot of risk. And unlike the situation a few decades ago, most DRIPs are handled by a handful of administrators, so it’s not necessary to end up with “lots of accounts scattered all over the place.” I have about 70 DRIPs and all but a few are summarized at BNY Mellon (BK), Computershare, and Wells Fargo (WFC). Company-sponsored plans are also far more robust, allowing participants to sign up for automatic monthly bank debits, often for as little as $25, to be invested without effort, and even if one doesn’t want to commit to automatic investments, many plans allow online investing that just takes a few clicks of the mouse.
So you might want to ask yourself…’Do I want to keep buying my son/daughter yet another toy or more junk food, or do I want to start them on the path to a more wealthy future’?

Disclosure: I am long ABT, AFL, CTL, DPS, EMR, GPC, MMM.



First Share, DRP companies, buy one share, direct stock purchase

Canadian DRIP & SPP List


canadian drip list Canada DRIPs AND SPP LIST TSX listed Canadian companies offering with dividend reinvestment list of drip taxes enhanced dividend tax credit stocks



Corporations


Income and Royalty Trusts

Closed End Funds and ETFs


DRIP SPP share purchase plan Canada DRIPS AGF Agnico Eagle Mines Bank of Montreal Bank of Nova Scotia BCE Brookfield Asset Mgt. Brookfield Properties CAE Caldwell Partners Canadian Tire Canadian Wst. Bank Caribbean Utilities  Cervus Equip. Corp. CIBC ClubLink Corus Ent. Crescent Point Energy Emera Enbridge Encana Equitable Group Exchange Income Corp Fortis Imperial Oil Intact Financial Killam Properties Loblaw Companies Manulife MCAN Mortgage Morguard National Bank Nexen Olympia Financial Trust Onex Corp Plazacorp Retail Potash Progress Energy Co,. Realex Corp Royal Bank Shaw Communications Student Tranportation Sun Life Suncor TD Bank Telus Tim Hortons  ThomsonReuters Torstar  TransAlta TransCanada Valener energy Western Financial Group rogers communications

Allied Properties REIT AltaGas Income Trust ARC Energy Trust Arctic Glacier Income Fund Artis REIT Baytex Energy Trust Bell Aliant Income Fund Calloway REIT Canadian Apartment Prop REIT Canadian Oil Sands Trust Canadian REIT Canexus Income Trust Charter REIT Chartwell Seniors Housing REIT CML Healthcare Income Fund Cominar REIT  Daylight Energy Trust Deepwell Energy Services Trust Dundee REIT Enbridge Income Fund Enerplus Resources Fund EPCOR L.P. Extendicare REIT Firm Capital Mortgage  Fort chicago Trust Freehold Royalty Trust H&R REIT Homburg Canada  InnVest REIT Inter Pipeline Fund InterRent REIT Just Energy Income Fund Keyera Facilities Fund Lanesborough REIT Macquarie Power Income Fund Medical Facilities Income Fund Morguard REIT NAL Oil & Gas Trust Northland Power Income Fund Pantera Drilling Income Trust Paramount Energy Trust  Parkland Income Fund  Pembina Pipeline Income Fund Pengrowth Energy Trust PennWest Energy Trust Peyto Energy Trust Phoenix Technology Inc. Fund Primaris Retail REIT Provident Energy Trust Riocan REIT Trilogy Energy Trust Vermilion Energy Trust Westshore Terminals Whiterock REIT

Full DRiP: A new beginning


I have been blogging about the benefits of DRiPing along with the different ways of DRiPing for the past week and I have just been initiated to the ‘Full DRiP’! I have been doing synthetic DRiPing for years now but ‘Full DRiP’ is a new venture to me.
All you need to do is get one share! Nothing else. The fee on getting the first share is actually low if you do it part of the groups. You don’t need to request a share certificate at all. I have done it 2 ways to acquire my first share in 3 companies.
Buy or exchange through another investor
I have bough my first share of Bank of Montreal (BMO) through another investor. All I did was ask on the ‘Share Exchange’ forum (See the DRiP investing resource center) to acquire my first share for the cost of the share + 10$ appreciation fee. The steps are simple:
  • Register on the forums
  • Post on the Share Exchange
  • Get in touch with whomever is selling a share
  • Pay the person (share price + 10$ for mail cost and thank you)
  • Wait a number of weeks for all the registration to happen
I am currently waiting to receiving confirmation from Computershare on my Bank of Montreal (BMO) share purchase/transfer.
Buy through a group purchase
Buying through a group purchase is when you cannot acquire shares from anyone when you want it. You can initiate the group purchase or simply participate in one. They fill really fast though, so you don’t want to think too long if you are interested. The group purchase is usually up to 10 people. The organizer will do the following:
  • Buy 10 shares + transaction fee
  • Request a share certificate (cost differs by discount brokers)
  • Fill out all the necessary forms for registration (group organizer and everyone else)
  • Register with Computershare or CIBC Mellon
  • Wait a number of weeks for all the registration to happen
I am currently waiting for my first share with Telus (T) and Enbridge (ENB).
It’s that easy!
It was really easy and not expensive at all when you participate in the exchange. The ‘underground’ DRiP groups are really good at exchanging and helping others. It goes a long way in reducing the entry cost. Once I am setup, I can decide when I do the optional cash purchase (OCP) and how much I invest (some companies have a minimum). Because of the lead time in getting setup, I decided to get setup with a group of shares all at once just to have them ready.
Will a financial advisor ever promote such investment? I doubt because they make absolutely no money. There are no fees to earn.
Financial Literacy
Getting my kids setup with DRiP this way is part of my financial teaching for them. Once I have my share, I can easily set them up. They will have years to see compound growth in action!
Happy DRiPing!

Children & Money: An Introduction to DRiP


Over the past 2 months, I have been accumulating my first share in a number of companies to get setup with Full DRiP under Computershare and CIBC Mellon (also referred to as the Transfer Agents). It has been a very easy process but you don’t want to be in a rush. That’s why I have ordered a good number of shares at once in order to be ready.
Being an Owner
Children learn by watching and experiencing at an early age. There is nothing better than a share certificate to easily feel what ownership means. I experienced a little tingling when I got my first share certificate and looked at it. The tingling didn’t last long but it was there. Imagine how pronounce that tingling can be for a child when they see their name on the share certificate. This is going to be a topic of conversation at school and a new beginning in discussing money.
Getting Them Involved
A friend shared his process of getting his kids involved and I thought it was brilliant and I will do the same once I have everything setup to transfer shares to them. He made some drawing on cards that represent the companies’ business, he explained the different companies a little in simplistic words and then he let them pick a company. This process has the children involved in picking the company that they will be able to monitor as they grow. When the share certificate comes in their name, it will be a result of their choice. If you can do more than one, it may be interesting as your child can also learn to compare the two as they grow. It can lead to comparing the following:
  • How much is each investment worth compared to each other?
  • How much dividends each pay?
  • How many shares do I have in each?
These questions, as they get older, will get them to exercise some mathematics to calculate scenarios (hopefully, I know I did).
Compound Growth Learnings
My plan is to contribute a small amount every year for them on their anniversary so that I can effectively teach them compound growth. Over the years, the theory of compound growth will realized itself in their account and it becomes a lot easier for them to understand. At a young age, I feel it’s important for children to experience it, it’s the best way to learn. Since their financial education is important to me, these monetary gifts to build a DRiP account is basically my cost for their financial education. A small price to pay for their financial success.
I know there are many people doing this already with their children – great initiatives everyone. One important factor is to pick a company that participate in the Dividend Reinvestment Plan. Otherwise the benefit of compound growth is lost.
Have a nice day!
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