[MoneyEnergy]

Just wanted a place to keep up to date on DRIP news, cancellations, changes, etc. What's your favorite DRIP?

Any news on DRIP plans in Canada?

 

[moneygardener]

Latest change to one of my DRIPs was Royal Bank's 3% discount.

http://www.rbc.com/newsroom/2009/0226-plan.html

I currently DRIP:
Johnson & Johnson
Telus
Royal Bank
Manulife

 

[Max]

In the fine print, I found out it not so easy to invest in DRIPs through my brokerage. I am with CIBC Investors Edge, and in order to qualify for the 3% discount on reinvested dividends, I would have to register my shares (at a hefty fee). I found out that CIBC's automatic enrollment plan really just takes the cash you receive from the dividend and reinvests it at the market rate.

I am a little nervous about the loss of control on the market price of my contributions if I just send them a cheque to buy shares directly. I do not really want to make regular contributions to the DRIP, I would rather just contribute a lump sum and forget about it.

What is the best strategy to make an initial investment in the DRIP?

 

[bgc_fan]

In the fine print, I found out it not so easy to invest in DRIPs through my brokerage. I am with CIBC Investors Edge, and in order to qualify for the 3% discount on reinvested dividends, I would have to register my shares (at a hefty fee). I found out that CIBC's automatic enrollment plan really just takes the cash you receive from the dividend and reinvests it at the market rate.

I am a little nervous about the loss of control on the market price of my contributions if I just send them a cheque to buy shares directly. I do not really want to make regular contributions to the DRIP, I would rather just contribute a lump sum and forget about it.

I was pretty much in the same situation. Personally, I find that a one-time cost to register the stock ($31.80, last time I did it with CIBC) isn't that onerous. I picked up a number of stocks, so I have a small portfolio of them, but haven't made any extra purchases lately (mortgage taking its toll). At any case, I let the dividends take care of themselves and I don't really bother with them. Even if I don't have the extra money to purchase more, at least the dividends are taking advantage of the current stock prices. My thoughts on the matter are that if I have the extra money, I'll send a cheque and purchase more of an undervalued stock.

As for DRIP news, BMO now offers a 2% discount on reinvested shares, not on cash purchases:
https://www-us.computershare.com/investor/default.asp?bhjs=1&fla=1&cc=CA&issuerid=scusbmoq&landing=y&showinvestorcontact=y

 

[MoneyEnergy]

If you make a large enough initial lump sum purchase of your future DRIP stock, then the time it will take to fully make back that outlay will be much less. Eg:

$52.00 certificate fee
$29.00 commission fee (using Waterhouse prices, here)
=$81.00

If you're able to buy $2000 of Scotiabank up front, that gets you about $28 with each dividend payment (assuming about a $35 share price, not sure what it's at right now). So in less than a year, you'll have your initial outlay back - and probably sooner, once they start bringing in dividend increases again. Obviously this can happen sooner the more you're able to purchase up front. With stocks that have discounts, it happens even sooner. Enbridge is great for that.

 

[MoneyEnergy]

I currently DRIP:

Scotiabank
BMO
Telus
Enbridge
TransCanada
Imperial Oil
Suncor
BCE
TransAlta
Bell Aliant
CIBC...

I have about 20 or so. This is in addition to stocks I have at the broker.

 

[Cal]

Yep. Same fees as MoneyEnergy, I used TdWaterhouse to make initial purchase.

After that, if the company has a SPP then only takes a few payments to save on the stock repurchase fees that you would have paid to the bank anyways.

Has anyone bought MFC since they changed their DRIP structure? I haven't yet, but m considering now that it has much lower DRIP fees.

Hoping for this market to ease up a bit to buy at a better price....

 

[Jon202]

Has anyone bought MFC since they changed their DRIP structure? I haven't yet, but m considering now that it has much lower DRIP fees.

I just picked up my starter in from a group buy and sent in the paper work at the start of the week. I think I just missed the div record date.

 

[Dave]

I have ENB, TRP, SU, CGI, BMO, BNS & CM. I picked up my first shares from others who already had drips and who transferred them to me. The entire process takes a lot of patience. There is a wealth of information on drip forums if you are interested. I especially like the fact that you can get started with small sums and the dividends are re-invested automatically unless otherwise specified.

Dave

 

[FinancialJungle]

Been dividend investing for several years now, but still very reluctant to DRIP. It's a little bit of an oxymoron, I think. Presumably we stock pick to buy excellent businesses at excellent discounts. 3% off market price usually doesn't spell enough of a discount, and the 3% discount is only available at the expense of dilluting existing shares. Plus the amount of effort required to track ACB just isn't compensated by the discount on the marginal purchases. The way I do it is to pool all my dividend earnings together and plow them into 1 or 2 purchases.

Not to dismiss all companies that offer DRIP, but the concept of DRIP, in some isolated cases, is a PONZI scheme; selling shares to fund dividends to existing shareholders. I much rather see my businesses raise capital only when capital is cheap, when share prices are over-inflated.

 

[Brad911]

...It's a little bit of an oxymoron, I think....The way I do it is to pool all my dividend earnings together and plow them into 1 or 2 purchases.

That's my approach as well. I believe that I am better capable to allocate capital into any undervalued or underexposed positions in my portfolio than simply allowing the DRIP to reinvest all my dividends from that company on a specific date each quarter. The discount is nice, but in the accumulation phase of my portfolio construction I am much more focused on building strong positions than receiving a slight discount that I can easily overcome with a lower LO in the open market over a period of 2-3 days.

 

[Cal]

I just posted this in response to a Taxation thread on TFSA's but I figure some of the people who check out the DRIP threads may have more info on this, so any help or input would be appreciated.

I would like to buy Arc Energy Trust AET.UN and set up a DRIP. Does anyone know anything about doing this?

I use TD Waterhouse as my brokerage, and already DRIP ENB through a non registered account so I am familiar with the process.

If I buy 5K of AET.UN through a TD TFSA (which will clearly show a record of a 5K transaction), is it the same process to get the share registered (ie: buy a share certificate)?

And then the next question is, next year, when I go to buy another 5K, do I send the cheque to Computershare ? (aware that the SPP maximum monthly purchase is 3K for AET.UN, so I know this would have to be purchased over the course of 2 months)

I just want to get my fractional shares....

 

[Jon202]

That's my approach as well. I believe that I am better capable to allocate capital into any undervalued or underexposed positions in my portfolio than simply allowing the DRIP to reinvest all my dividends from that company on a specific date each quarter. The discount is nice, but in the accumulation phase of my portfolio construction I am much more focused on building strong positions than receiving a slight discount that I can easily overcome with a lower LO in the open market over a period of 2-3 days.

That's perfectly fine. But drippers don't really about one particular purchase price, as most buy regularly over a long period of time. I buy small amounts of all my holdings over the course of the year for no fees other than a stamp. The shareprice doesn't concern me, it's the rising dividends. Sure, I know the typical argument that div are only 1/2 of returns, but compounding of the reinvestment is a long term process.

 

[Jon202]

I just posted this in response to a Taxation thread on TFSA's but I figure some of the people who check out the DRIP threads may have more info on this, so any help or input would be appreciated.

I would like to buy Arc Energy Trust AET.UN and set up a DRIP. Does anyone know anything about doing this?

I use TD Waterhouse as my brokerage, and already DRIP ENB through a non registered account so I am familiar with the process.

If I buy 5K of AET.UN through a TD TFSA (which will clearly show a record of a 5K transaction), is it the same process to get the share registered (ie: buy a share certificate)?

And then the next question is, next year, when I go to buy another 5K, do I send the cheque to Computershare ? (aware that the SPP maximum monthly purchase is 3K for AET.UN, so I know this would have to be purchased over the course of 2 months)

I just want to get my fractional shares....

You're confusing the TFSA with a traditional DRIP. Yes, I believe you can order a cert from a TFSA brokerage account, but that would be a withdrawal and the room wouldn't be re-attributed back to the account until the following year.

Essentially you need to be a registered shareholder of ARC, be it 1 share or 1000, then you can sign up for the DRIP & UPP.

 

[Cal]

Sorry Jon202 (and anyone else), if I wasn't clear.....

I want to set up a holding of AET.UN within my TFSA. As I understand it I would transfer $5000 into the TFSA, then would purchase roughly $4970 worth of AET.UN, with approximately a $30 transaction fee. I believe I can order the share cert. and pay for that with money outside of the TFSA, as it isn't part of the investment, it is merely needed to register it under myself.

From that I would obviously be able to contact Computershare to set up the DRIP. I was just wondering if anyone else out there had set up a DRIP within their TFSA, and if so how the process went.

Which then makes me wonder a year ahead, as if the DRIP is set up, then I could use the SPP to purchase next years $5000 TFSA limit also, avoiding the $30 transaction fee through TD Waterhouse. (and I know that AET.UN has a $3000 SPP monthly maximun, so it would have to be done over the course of 2 months) But for tax purposes, how would Revenue Canada know that the intention of the 2nd years $5000 was to be held in the TFSA?

 

[Jon202]

Sorry to repeat, but you're confusing the TFSA with a Traditional DRIP. A Traditional DRIP is a non-registered/taxable holding, where you need to be a registered shareholder.

I suggest you read through my pages, esp. the DRIP FAQ page to understand the difference between traditional DRIPs and synthetic DRIP. See the link in my signature.

 

[FinancialJungle]

I buy small amounts of all my holdings over the course of the year for no fees other than a stamp.

Investors who reinvest dividends without using DRIP generally piggyback on purchases from regular savings. In practice, my dividends are reinvested without incurring any additional transaction fees.

The shareprice doesn't concern me, it's the rising dividends. Sure, I know the typical argument that div are only 1/2 of returns, but compounding of the reinvestment is a long term process.

Both entry price and dividend growth determine the portfolio return. Anyhow, reinvesting dividends outside of DRIP doesn't sacrafice the dividend growth component.

 

[Cal]

Sorry to repeat, but you're confusing the TFSA with a Traditional DRIP. A Traditional DRIP is a non-registered/taxable holding, where you need to be a registered shareholder.

Again I already DRIP ENB in a non registered account. So I am familiar.

So what you are saying is that a TFSA can only hold a synthetic DRIP, not a traditional DRIP, which would answer my question about, how to ensure that your contribution for year 2 of your TFSA contribution gets registered. (answer - 2nd years shares are purchased through broker just like 1st year - got it)

Too bad, that we can't get the fractional shares....that would have been nice.

Ahh well, at least the TFSA is a good vehicle to hold the Trust from a tax perspective.

 

[Spidey]

I also wonder with today's low commissions if DRIPing is worth it. It may have been when commissions were perhaps $45 per trade, but now at $9.99 there is less of an incentive for me to DRIP.

Some advantages I find to not DRIPing are:

- Keeps things simple for accounting purposes. I buy 100 shares and sell 100 shares. ACB is just the difference in price + commissions.

- I think getting the dividend in cash makes things a little more transparent. For example, on my Novartis shares, I noticed that the Swiss government hits Canadians with a big withholding tax. I may have been less likely to notice, if I had a DRIP program in place.

- As others pointed out, I can determine where to put my dividends. Perhaps my stock is overvalued at the moment - so why should I buy more? Depending on the market, I usually put my dividends either in cash or a low-MER index fund until I have enough and the time seems right to consider buying more stock (often a different stock).

- I can use the dividends to help rebalance my portfolio, rather than selling stock.

 

[Jon202]

I also wonder with today's low commissions if DRIPing is worth it. It may have been when commissions were perhaps $45 per trade, but now at $9.99 there is less of an incentive for me to DRIP.

Some advantages I find to not DRIPing are:

- Keeps things simple for accounting purposes. I buy 100 shares and sell 100 shares. ACB is just the difference in price + commissions.

- I think getting the dividend in cash makes things a little more transparent. For example, on my Novartis shares, I noticed that the Swiss government hits Canadians with a big withholding tax. I may have been less likely to notice, if I had a DRIP program in place.

- As others pointed out, I can determine where to put my dividends. Perhaps my stock is overvalued at the moment - so why should I buy more? Depending on the market, I usually put my dividends either in cash or a low-MER index fund until I have enough and the time seems right to consider buying more stock (often a different stock).

- I can use the dividends to help rebalance my portfolio, rather than selling stock.

You're points are all true spidey, except that most if not all "traditional drippers" are not in the same boat.

First, regarding trading commissions, most if not all drippers can't/don't start out with the $1000 or $5000 required to open an account. Getting a single share with a value of $20-$30 is all that's required, then future purchases are still commission free. Also, according to a survey on another DRIP board, more than half of drippers send less than $200/month on OCPs. Even at $9.99 per trade, with others in the $20-30 range, that'd be %5-10 or more eaten up by fees. Market timing isn't really considered, rather long term dollar cost averaging is.

Secondly, regarding buy and selling for taxes, you're right. Though most if not all drippers do not consider ever selling their holdings so long as they still meeting their objectives (consistent/rising dividends). So it's not a concern. Also, most drippers use a simple spreadsheet to input purchase amounts and reinvestments to keep track of cost base if ever needed. This takes me 5min a month max.

And you're 3rd point is very accurate for drippers with years of holdings, and something I'm considering doing soon. Say I have 10 DRIPs of varying sizes and payments. With dripping you can always "turn off" the DRIP and have the cash deposited in an a free chequing account and redirect those funds to your smaller drips with more free OCPs to balance out your holdings.