Canadian DRIP FAQ 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 Min/Period column on the CDN DRIP & SPP List?
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 and/or SPP?
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.
4. If I DRIP and/or OCP, do I get taxed even if I don't receive any cash?
Yes. Since DRIPs run by the Transfer Agents are not in an RRSP Account, you will receive a tax slip for each DRIP.
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 transfered 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?
Not in the same, simple manner described on the DRIP Primer, but there are round-about methods to accomplish this. See this article entitled: DRIPs and RRSPs. Or you can consider a Synthetic DRIP for your Self-Directed RRSP account. See #10 below. Have a look at this Blog Posting about DRIPping ETFs and Stocks with Canadian Brokers.
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.
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. You can physically go to the U.S. and open a chequing account or some of the Canadian Banks such as Royal Bank and BMO offer special cheques (Par-Crossed Cheques). These cheques with U.S. routing codes and that clear through a U.S. Branch are required to buy U.S. stocks through DRIP/SPP Plans. Royal Bank is also known to assist Canadians opening an RBC Centura account, Scotiabank may assist you with with a Bank of America account and BMO clients have access to Harris Bank.
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 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.
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 often called a Synthetic DRIP and has some Pros and Cons.
Synthetic DRIPs feature:
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.
12. How do I sell shares I bought through the DRIP Plan or Share Purchase Plan?
In Canada, some of the Plans allow you to request the Transfer Agent to sell the shares directly on your behalf. A fee is charged for this service, as well you have little control over the exact date and price they are sold for. If you have a brokerage account, you can request a certificate for X number of shares from the Transfer Agent which is free, then sell them through your brokerage account. Some brokerages charge for receiving certificates, as well a trade commission will be charged for the sale but you can decide exactly when to sell. Either way, you could have tax implications for selling.
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 the TSX page (www.tsx.com ) offers this info. Type in the Stock Ticker in "Get Quote", click Go, then scroll down and look for Indicated Dividend Rate. This value is an assumed annual rate based on the last payment and frequency.
14. What is a Direct 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 DSPP to Canadians, with the exception being Fortis Inc. Fortis allows residents of Newfoundland and P.E.I. to starting DRIPping directly. See the "consumer share 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)
15. Do you make any money from this site?
I receive no money or fees for this site as I am charged nothing from Googlepages for this site.
No. The OCP 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, $120 in November and then not send anything for months. This is what makes it "Optional". The period 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 and/or SPP?
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.
4. If I DRIP and/or OCP, do I get taxed even if I don't receive any cash?
Yes. Since DRIPs run by the Transfer Agents are not in an RRSP Account, you will receive a tax slip for each DRIP.
Dividends are the least taxed form of income. If you sell 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 transfered 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?
Not in the same, simple manner described on the DRIP Primer, but there are round-about methods to accomplish this. See this article entitled: DRIPs and RRSPs. Or you can consider a Synthetic DRIP for your Self-Directed RRSP account. See #10 below. Have a look at this Blog Posting about DRIPping ETFs and Stocks with Canadian Brokers.
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.
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. You can physically go to the U.S. and open a chequing account or some of the Canadian Banks such as Royal Bank and BMO offer special cheques (Par-Crossed Cheques). These cheques with U.S. routing codes and that clear through a U.S. Branch are required to buy U.S. stocks through DRIP/SPP Plans. Royal Bank is also known to assist Canadians opening an RBC Centura account, Scotiabank may assist you with with a Bank of America account and BMO clients have access to Harris Bank.
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 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.
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 often called a Synthetic DRIP and has some Pros and Cons.
Synthetic DRIPs feature:
- WHOLE Share purchases only, not fractional shares. Dividends paid must be greater than share price.
- Eligible companies: Choice of companies to DRIP may be greater or lesser those on the DRIP List.
- To Buy more Shares, you will pay the broker commissions.
- Most Discount Brokerages stipulate you must DRIP all companies or none at all.
- RRSP/RESP compatible: Since all brokers should offer Registered accounts, one benefit is you can synthetically DRIP in your RRSP/RESP if you have enough shares to meet the whole share requirement.
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.
12. How do I sell shares I bought through the DRIP Plan or Share Purchase Plan?
In Canada, some of the Plans allow you to request the Transfer Agent to sell the shares directly on your behalf. A fee is charged for this service, as well you have little control over the exact date and price they are sold for. If you have a brokerage account, you can request a certificate for X number of shares from the Transfer Agent which is free, then sell them through your brokerage account. Some brokerages charge for receiving certificates, as well a trade commission will be charged for the sale but you can decide exactly when to sell. Either way, you could have tax implications for selling.
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 the TSX page (www.tsx.com ) offers this info. Type in the Stock Ticker in "Get Quote", click Go, then scroll down and look for Indicated Dividend Rate. This value is an assumed annual rate based on the last payment and frequency.
14. What is a Direct 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 DSPP to Canadians, with the exception being Fortis Inc. Fortis allows residents of Newfoundland and P.E.I. to starting DRIPping directly. See the "consumer share 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)
15. Do you make any money from this site?
I receive no money or fees for this site as I am charged nothing from Googlepages for this site.