Canadian Money Forum banner

1 - 5 of 5 Posts

·
Registered
Joined
·
212 Posts
Discussion Starter #1
As more and more boomers are getting ready to retire and interest rates are very low I would think that dividend paying stock will become more attractive in the next few years. We have 100000 from a GIC coming due soon and would like to consider an ETF in dividend paying stocks with a synthetic drip. However my DH is approaching 70 and I am approaching 60. Would we see any benefit from Dripping or has that window closed for us?
 

·
Registered
Joined
·
450 Posts
If you're still building your savings, and want to own more of whatever ETF you settle on (i.e., it fits your asset allocation), then dripping can certainly benefit you -- especially a synthetic DRIP since they're so easy to turn off when the time comes to start withdrawing cash rather than saving it.

If you're already at the point where you're drawing from your savings though, then it doesn't make too much sense to reinvest the dividends just to sell something else and pay commissions...
 

·
Registered
Joined
·
174 Posts
Could you elaborate further on setting up synthetic DRIPs, or point me in the direction of some reading/examples?
 

·
Registered
Joined
·
2,626 Posts
If you have an self-directed investment account with any of the big players, call them up and ask them to set this up (I know RBC and TDW allow this). What will happen is when you get a dividend or any type of distribution, if it is enough (after taxes for international securities) to be used to purchase more whole units, they will do so free of charge.

So if you hold 1000 units of company X which has a current share value of $10, and your distribution is $22, then you will get 2 shares + $2 instead of the cash alone.

The problem with this is the investment account companies do not allow synthetic drips for all holdings, with RBC, you have to call them up and ask about specific holdings. Another downside is that it is all-or-none for the entire account. If you use this feature, they will DRIP all your eligible holdings, so if you didn't want the DRIP for a specific security, tough luck.
 

·
Registered
Joined
·
174 Posts
I see, I see. I did a bit of research and I think I already have my own mini synthetic DRIP happening, but didn't really realize it as when I received my initial dividend payments the amount was not significant enough to allow for the purchase of additional shares. I did look this morning and it seems that I do now have enough money coming in via dividents to purchase additional shares.

Thank you!
 
1 - 5 of 5 Posts
Top