Mr. Gibb has some thoughts on whether the SPP option and discounts available through some classic DRIPs make them a better bet than broker DRIPs. He said the SPP option is nice to have because it saves you the cost of a stock-trading commission, which at an online broker can cost anywhere from $5 to $29, depending on the firm and how large your account is. As for the discount, he argues it’s not all that significant when you’re buying only a few shares with your dividends every quarter.
One area where broker DRIPs have a clear advantage is in how easy they are to set up. At RBCDI, you can call in, send a secure e-mail through its website for clients or mail a letter of direction. You can hold a DRIP stock in a registered plan or a cash account, so it’s integrated with your other investments.
Mr. Gibb said he’s found a couple of ways to make setting up a classic DRIP more convenient and inexpensive. One is to ask someone who already has a classic DRIP plan on a particular stock to transfer a share to you. This can be done at no charge through a company’s transfer agent.
Another option is a pooled purchase, where one individual buys a block of shares in a DRIP company and then has the transfer agent distribute some of them into new accounts for other people. Mr. Gibb said he’s heard of this being done for groups as large as 50 people.
Maintaining a DRIP account is also easier when held through a broker. If you want to sell some of your holdings in a DRIP stock, you just go online and do it whenever you want. The transfer agent can sell shares for you in a classic DRIP, but you won’t have any say over the time and price you get, and you may have to pay a small fee. Another way to sell shares in a classic DRIP is to request that the transfer agent send you paper shares, which you can forward to your broker to have sold through your account.
Broker DRIPs are more convenient, while classic DRIPs offer more value. Both are great ways to build wealth, though. “In the 30 DRIPs that I have, I’ve saved almost $3,000 in commissions over 15 years,” Mr. Gibb said. “That’s money now working for me.”
Brokers and DRIPs
A survey of how online brokerage firms handle dividend reinvestment plans
| Firm | DRIP Availability | DRIP Cost | ETF DRIPS |
| BMO InvestorLine | 270+ Canadian securities | None | BMO and Claymore ETFs |
| CIBC Investor's Edge | 983 Canadian and U.S. securities | None | Yes |
| Credential Direct | 200+ Canadian securities | None | Yes |
| Disnat | 165 Canadian securities | None | Yes |
| HSBC InvestDirect | 245 Canadian securities | None | Yes |
| National Bank Direct Brokerage | 245 Canadian securities | None | Claymore ETFs |
| Questrade | A wide selection of Canadian and U.S. securities | None | Yes |
| Qtrade Investor | A wide selection of Canadian and U.S. securities | None | Yes |
| Royal Bank Direct Investing | 1,233 Canadian and U.S. securities | None | Yes |
| Scotia iTrade | A wide selection of Canadian and U.S. securities | None | Yes |
| TD Waterhouse | 1,595 Canadian and U.S. securities | None | Yes |
| Virtual Brokers | Most dividend payers on the TSX, NYSE and Nasdaq are eligible for what VB calls its Dividend Purchase Plan | $1/month | Yes |
The Dope On DRIPs
Some websites of interest to investors who want to set to set up dividend reinvestment plans:
Cdn Dividend Reinvestment Plans
DRIP Investing Resource Centre
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