Go to the Globe and Mail homepage

Jump to main navigationJump to main content

AdChoices
(Comstock)
(Comstock)

Ask An Adviser

Can I actually own a fraction of a share? Add to ...

Dear Nancy Woods,

I own a Canadian dividend paying stock in my TFSA account and recently signed up for the dividend reinvestment option. While I understand some of the benefits of this option, especially minimizing investment fees, I wonder how exactly it works. Say, for example, that shares are trading at $40 and I earn $5 in dividends per quarter. Clearly, this is not enough to purchase another share. So what happens to the dividend payment?

In another context, I have seen fractional share statements (e.g. "You own 23.1235 shares in XYZ") but I wonder if that is simply accounting fiction since I don't think one can only hold 0.1234 shares in a stock. Can you better explain the related issues of dividend reinvestment and fractional share ownership?

Thanks,

Bruce





Dear Bruce,



When enrolled in a Dividend Reinvestment Plan (DRIP), you can do so in a couple of different ways. If you do it with the transfer agent where the shares are held they can purchase fractional shares. If your shares are held at a financial institution they may only be able to purchase whole shares. Any excess of the dividend would be paid in cash. In either case, sometimes a company may offer a price discount for shareholders enrolled in their DRIP.

The fractional shares you may have seen also happens with mutual funds. When the income from a mutual fund is reinvested, or for the straight purchase of a mutual fund, the number of units is expressed as a whole and fractional amount.



Nancy Woods, CIM, FCSI, is an associate portfolio manager and investment advisor with RBC Dominion Securities Inc. To ask her a question, send an e-mail to asknancy@rbc.com

READ MORE FROM OUR ASK AN ADVISER SERIES HERE

Report Typo/Error

Next story

loading

In the know

The Globe Recommends

loading

Most popular videos »

Highlights

More from The Globe and Mail

Most popular