Canadian DRIP FAQ




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A few Frequently Asked Questions about DRIPing Canadian companies. 
Use the Contact Us Form to suggest a question.

Did you skip the Primer?  Start there.

1. Minimum Optional Cash Purchase (OCP) is $100 per Month. Do I have to send $100 each and every month? Or How do I interpret the SPP MIN & SPP FREQ column on the CDN DRIP & SPP List?
No. The optional cash purchase minimum is simply the minimum amount the company is willing to accept IF and WHEN YOU choose to purchase more shares through the Share Purchase Plan. For example: CIBC's minimum is $100 and their frequency is Monthly. So you could send $100 to CIBC in February, $155 in March, then $120 in November and then not send anything for a whole year. This is what makes it Optional. The frequency just means how often they purchase shares for investors, which is usually monthly, quarterly or yearly.

2. Do I have to own and keep a share/stock certificate to remain in a DRIP?
Not if you don't want to. A share certificate is simply a paper issued to represent ownership of X number of shares to a shareholder, so it is valuable. To remain in a DRIP, you must own at least 1 share, so if you holder more than 1 share in "Book Format" (AKA your DRIP holdings) then you can sell/transfer the share certificate to someone else.


3. Why doesn't XYZ Corporation offer a DRIP & SPP or how to I invest in a company that only has a DRIP?

I don't know, but there could be a number of reasons. There are hundreds of U.S. companies that offer DRIP/SPP plans, but only a few dozen Canadian companies. Best thing to do is go to the Company's website, locate the "Investor Relations" section and call/write them to ask why.
Here are some companies to write to ask them to add a DRIP/SPP.  Why Not check out also the answers I've received to my requests.

If you want to invest in a company that only has a DRIP and you have written to them asking for a Share Purchase Plan (SPP) what are your options then?
  •  Not invest in the company and tell them that.
  •  Invest (buy shares) using a Discount Brokerage Account (fees$), and chose to synthetically DRIP it (see #10 below).
  •  Buy many shares using a Discount Brokerage Account, request certificate, and enroll in the DRIP.  Since this will incur fees through the broker and will by high, you will want to buy as many shares as you can to fully utilize the compounding effects of a traditional DRIP with fractional share reinvestment.

4. If I DRIP and/or OCP, do I get taxed even if I don't receive any divdends in cash?
Yes, since DRIPs run by the Transfer Agents are not in a Registered (RRSP, RESP, TFSA, etc..) account.  You will receive a tax slip
(T-3s or T-5s) for each company stating the dividends/distributions you received for the year and you'll enter this in your tax return. 
 Some companies are directing the Transfer Agents NOT to mail out slips for annual dividends received less than $50.  These companies are: Scotiabank, Fortis, National Bank, BCE, Manulife, SunLife.
You are still responsible for reporting these dividends.

Dividends are the least taxed form of incomeIf you sell (transfer) any shares, you may incur a Capital Gains.

5. How do I transfer or sell 1 share to someone else to allow them to start DRIPing?

There are 2 ways to do a transfer. First with a share certificate, on the back is a form which you would fill in with the transferee's(Buyer) name & address, and then get it Signature Guaranteed as you sign it. Second, if you own shares through a DRIP Plan you can transfer 1 share (or more) from your plan holdings using a Transfer Form. This is basically the same form as on the back of a certificate, but you would have to fill in the company's name. This would also have to be Signature Guaranteed. It's highly recommended to give the transferee a letter written by you to the Transfer Agent stating you want 1 share transferred FROM your DRIP holdings to the Transferee.

Then, in both cases the Certificate or Form is mailed to the Transfer Agent to register the Transfer, and a NEW certificate with the Transferee's name on it would be mailed out.

6. Can I DRIP inside my RRSP, RESP or Tax Free Savings Account (TFSA)?
Not in the same, simple manner described on the DRIP Primer, since they are taxable holdings (see Questions #4 & #10).  But there are other ways, you have 2 options:

 A.) The easiest would be choosing a Canadian discount broker that offers a Synthetic DRIP.  Read Question 10 below if you don't know what that is.  Then buy shares within that account that the Broker will DRIP for you, and ask them to do so. 

 B.)  Request a certificate for shares from your regular DRIP and then deposit that "in-kind" to your brokerage account.  The upside to this would being able to buy shares for free through your DRIP/SPP and contribute them to your RRSP/RESP/Etc... but the downside is that this contribution would be considered a "sale" (disposition) and you would need to calculate and claim any capital gains.  Read more here about calculating Adjusted Cost Base for DRIPs.

7. How is the purchase price or reinvestment price determined?
This is actually pretty complicated since it depends on which DRIP plan is in question. Each plan sets out the price calculation in their Circular or Prospectus. Since there are many different cases, you should check the circular.  In most cases, DRIP or SPP purchase prices are determined using the average weighted share price of a Board Lot (100 shares) during the final 5 trading days before the purchase date.

8. As a Canadian, can I participate in U.S. DRIPs and Direct Stock Purchase Plans?
Yes but be sure to check the Circular for eligibility as some Plans don't allow foreign owners. There are hundreds of DRIPs in the U.S. as well as many Direct Stock Purchase Plans which allow you start by buying direct from the Transfer Agent.

The only thing you need as a Canadian is the right type of chequing account.  The best option is to open a U.S.-Based checking account, either in person or online such as with Harris Bank.  2 Canadian Banks used to offer special cheques (Par-Crossed Checks) but have suspended this service. Read more HERE about banking requirements for U.S. DRIPs as a Canadian.


9. I own shares of a company in my discount brokerage account AND also purchased 1 share through a private exchange to DRIP. Will all my shares count towards the DRIP plan?
No, only those shares registered in YOUR NAME with the Transfer Agent will count towards the DRIP. Shares in a discount brokerage account are not actually in your name, rather they are held "in Trust" by the Broker for you. (You are the Beneficial Owner) So you would have to request a certificate and pay the fee to have those shares registered in your name and become the Registered Owner.  If you want to buy more shares for your DRIP, the easiest way is through the Share Purchase Plan.

10. My discount broker advertises Dividend Reinvestment or DRIP.  What's the difference between this and the traditional DRIPs?
A DRIP offered by a Discount Broker is called a Synthetic DRIP which is NOT the same as a traditional DRIP

Synthetic DRIPs feature:
  • WHOLE Share purchases only, no fractional shares. Dividends paid must be greater than share price.
  • DRIP Discount: Reinvestment discount offered by Corps. MAY or MAY NOT BE passed along to you.
  • Eligible companies: Choice of companies to DRIP may be greater or lesser those on the DRIP List.  Some brokers will also DRIP ETFs for you.  Contact your broker and ASK.
  • No Free Purchases (SPP):  To Buy more shares, you will pay the broker's commission ($5-$35).
  • Some Discount Brokers stipulate you must DRIP all companies you own or none at all.
  • RRSP/RESP/TFSA compatible: Since all brokers should offer Registered accounts, you can synthetically DRIP in your RRSP/RESP/TFSA if you have enough shares to meet the whole share requirement mentioned above.
  • Simplicity:  If you do own enough shares to meet the whole share reinvestment minimums, it could be simpler and smarter to organize your DRIPs through a broker, especially if commissions are low.
  • Taxation and Tracking:  If your shares are in a taxable account, tax time is easier as all information will be one 1 slip, and some brokers will keep track of all purchases/reinvestments for you.
Everything mentioned on the PRIMER and other pages on this site refer to a Transfer Agent-run, company sponsored DRIP and SPP plan ("Traditional DRIP"). 

Do not confuse the 2 types of DRIPs.

11.
What is a Transfer Agent?

A company hired by another company to maintain records of investors, payout dividends, to cancel and issue certificates, manage employee share plans and DRIPs, to process investor mailings, etc....
The main transfer agents in Canada are CIBC Mellon, Computershare, Valiant Trust &
Equity Trust.
 Canadian Transfer Agent contact information.

12. If I want some cash, how do I sell shares I bought through the DRIP or Share Purchase Plan?
To sell some or all or your shares, you have 2 options:
  Option 1:  Some of the Canadian plans allow you to request the Transfer Agent to sell the shares directly on your behalf. A small fee is charged for this service, as well you have little control over the exact date and price they are sold for.
  Option 2:  If you have a brokerage account, you can request a certificate for any number of shares from the Transfer Agent which is free, then sell them through your brokerage account.  Some brokerages charge for receiving (depositing) certificates, as well a trade commission will be charged for the sale but you get to decide exactly when to sell.
  Either way you could have tax implications (Capital Gains) for selling.  See this Blog Post on calculating Adjusted Cost Base for Taxes.  It is not very efficient to plan to sell DRIP/SPP acquired shares only after a short amount of time.  Question is, if you are planning on selling them early, why start a DRIP & SPP in the first place?


13. How do I find out how much the dividend/distribution a Company is paying?
Each company's website should have a section for investors, typically called Investor Relations, where they post a history of their past and future payments. You can find out how often they pay, and how much.  Also at the TSX page ( www.tsx.com ) type in the Stock Ticker in "Get Quote", click Go, then in the detailed quote box will show the Dividend.

14.
What is a Direct Share/Stock Purchase Plan (DSPP) and do we have them in Canada?
In the U.S.A. companies allow potential investors BUY shares DIRECTLY from them to get started in the DRIP & SPP. Often this Direct Purchase has no fees attached so it's a VERY efficient way to start investing.

Unfortunately, due to securities laws in Canada and from the fact that each province has its own regulator, only certain provinces allow this.  Also, Canadian companies seem unmotivated to offer Direct Share Purchase Plans to Canadians, with the exception being Fortis Inc. and Tim Hortons.  Fortis allows residents of Newfoundland and P.E.I. to starting DRIPping directly. Fortis has a free "Consumer Share Purchase Plan" and a regular DRIP & SPP for other Canadians.  Tim Hortons adopted a Direct Share Purchase Plan in 2011, but it comes with some fees, read more on the Tim Hortons plan.

Why not write a letter to a Canadian company asking them to offer a Direct Stock Purchase plan like Fortis?

Click HERE to see a selected list of American DSPP that are Fee-Free (Credit: MGK65)




*** Updated***
15. Do any share purchase plans offer automatic bank withdrawal (Pre-authorized chequing, etc..)?
Yes, like in the U.S. where DRIPs and SPPs are popular and automatic direct purchases are common, here in Canada Computershare has recently launched it's Pre-Authorized Debit (PAD) service.  Selected issuers (corporations) managed by Computershare offer it. An investor can either setup recurring or one-time purchases. 

If not offered, you can also send post-dated cheques for the monthly plans, so you could mail in several cheques at once.  Another exception is that RioCan REIT (REI.un) and Canadian REIT (REF.un) both offer pre-authorized purchases/chequing (PAP/PAC) plans.


Also, many of the Larger ETF providers offer free Pre-authorized purchase and withdrawal plans.

16.  How do you turn off a DRIP? Or what do I do when I want money from my DRIPs?
A number of reasons could want you do start receiving cash:  Your goals for your portfolio have been reached, life events changed and added income are needed or you maybe want to redirect the dividends to other investments.  Whatever the reason, every DRIP can be "turned off" and you the shareholder would start receiving the dividends by cheque or direct deposit.  You would need to contact the Transfer Agent responsible in writing and ask they stop the DRIP for you.  That's all.  It's your money, you can do whatever you want with it.

17. What is a DRIP account or, How do I open a DRIP account?
You don't DRIP an account, you participate in a company's DRIP and SPP Plans for their stock.  This can be done 2 ways: Traditional way, as a registered shareholder as mentioned in the DRIP Primer, where the transfer agent manages your holdings and administers the plans, or synthetically (as mentioned above in Q.#10) using a discount broker where you are the 'Beneficial Owner'.

YOU DO NOT NEED TO OPEN A DRIP ACCOUNT.


The transfer agents who administer the DRIP/SPP plans for the companies offer an online account access which offers information such as # of shares, reinvested price, etc... all the information which is mailed to you in your DRIP/SPP statement.  It is NOT essential to register for online access with the transfer agent, but most do.

18. Can I buy shares & DRIP with my Spouse, for my Child / Grandchild?  How can I transfer a share to a child so they can DRIP?
Yes you can, though there are different tax implications.  Speak to an certified tax specialist.

The process is exactly the same as described on the DRIP Primer, except the name(s) registered is different:

Spouses:
Joint Tenant account for securities - You would register the shares as John Q. Public and Jane Q. Public, JT TEN.

Minors:
In Trust Accounts for securites - John Q. Public IN TRUST FOR Michael D. Public.  

This is called an "informal trust".  The minor owns the shares, but the parent is responsible for all taxes and for submitting the paperwork.  Since a minor can't have a chequing account at a bank, the parent can send in the cheques for optional cash purchases.

19. What is a "signature guaranteed" and how do I get one?

To complete a transfer of ownership of 1 or more shares (securities transfer) the Transfer Agents(see Q#11) require your signature on the form to be verified and guaranteed by a bank employee.  This must be done by an employee of a major Canadian bank (not co-op) in the space provided on the form.  Be sure have them include their alpha-numeric ID as well ask for a business card for future reference.  If you are a BMO client, you can ask for a Medallion Stamp, which is another type of guarantee.  You should never pay for a signature guarantee, but a bank may refuse to give you one if they don't know you.

20. Can I invest in DRIP/SPP with my business/corporation?
Generally, yes.  Depending on the which transfer agent you have to deal with, you will be required to provide certified copies of documentation indicated who are the directors of, their occupations, who has signing authority for financial decisions along with business and CRA certificates.
(Thank you to Vincent for this information)

21. Do you make any money from this site?
I receive a referral commission through the Google AdSense program if a advertisement link is clicked.