Jon Degan, 33
Shares in Enbridge, Telus, CIBC, Scotiabank, Fortis, Manulife, TransAlta, H&R REIT and RioCan REIT.
About nine years ago, Jon Degan traded in his mutual funds for stocks with rising dividends and dividend reinvestment plans (DRIPs). He's become something of an expert in Canadian DRIPs and has authored a guide, posted online at dripprimer.ca.
How he invests
Company-sponsored DRIPs offer commission-free, automatic reinvestment of dividends at discounts of up to 5 per cent off market prices – even for fractional shares. Mr. Degan also likes that many DRIPs come with share purchase plans (SPPs). They let investors buy commission-free shares directly from the company on a monthly or quarterly basis.
"DRIPs and SPPs make direct investing in great Canadian companies easy, low cost and understandable to the average citizen," Mr. Degan says. "If you can write a cheque, you can easily invest with DRIPs. Banks [would] love us to believe high-fee accounts are the only option, but they aren't."
"I don't claim DRIPs and SPPs are the only solution, but for someone who may only have $100 to $200 every month to invest in stocks, they should be considered. A downside is you will receive statements and need to keep track of your cost base if you ever want to sell. But I use a simple spreadsheet and binder to keep on top, and it takes me about an hour every couple of months."
"With a young family, my level of funds to invest varies widely and I don't have a lot of free time to watch markets. So my DRIPs keep reinvesting – down to the thousandth of a share – even if I forget about them. They also let me ignore daily price swings, and focus on recurring purchases and the power of compounding that arises from reinvesting dividends."
He has done very well with his Enbridge DRIP, established nine years ago. "I've seen the dividend double and my reinvestments through the DRIP have built more than a quarter of my position."
It was trying to trade stocks, and finding that his emotions got in the way.
"If you aren't saving or investing, start immediately even if it's small."
Special to The Globe and Mail.
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